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Tough for industry to crank up quickly: Venu Srinivasan

Murali Gopalan | Updated on May 28, 2020 Published on May 28, 2020

Venu Srinivasan, Chairman, TVS Motor Company

TVS Motor Company Chairman speaks of the challenges ahead while easing the lockdown

Venu Srinivasan believes the devastation caused by the pandemic is not going to disappear in a hurry.

“It is going to be a very painful period in our economic history. I really think we have to hunker down and go through it because there is definitely no stop to this infection,” says the Chairman of TVS Motor Company.

The truth is that Covid-19 is likely to stay around for a long, long time to come. Being a fast mutating coronavirus, a vaccine may not be found very quickly either. Yet, the good part at least for now is that it is not so fatal, “which means we will learn to get on with our lives and live with it”.

As he explains, this is information based on over five months of the virus being studied internationally which, in turn, could have played a key role in prompting many countries to ease up their lockdowns. “When India decided to shut down in March, very little was known about this virus,” says Srinivasan.

During this time, there have been more updates coming in about Covid-19 and many Indian States have decided to open up factories in recent weeks. However, the recovery process will take time, especially when “you have clogged all the wheels of industry with grease which has caked and stuck”. Add some rust to this and it is obvious that “you cannot just switch it on and expect it to run”.

As Srinivasan says, the top priority is to protect factories from accidents and make sure that all safety norms are in place. Right from furnaces to chemical reactors and heat exchangers, everything needs to be reset. “Across the country, you have to evaluate the status of the plant and make sure that it is done in a systematic process,” he adds.

There are other challenges to contend with as the industry slowly limps back to a state of normalcy. Companies need to cope with the reality that “lots of people, including the younger lot,” are not turning up for work.

“For those living in containment zones, we would advise them to stay there and not come to work since others will be put to risk in the process,” says Srinivasan. However, there are people who are not in the containment zone but are still refusing to come to work because “there is pressure” from parents, spouses, children and peers. “There is a lot of fear but people are slowly coming in and we will have enough at work (in TVS),” he says.

Migrant labour

The situation is a lot more complex for ancillary suppliers, especially the small ones, categorised as Tier 2/3 vendors. These entities employ a lot if migrant labour who are clearly in no mood to return to the cities in a hurry.

“These migrants have gone back with great difficulty to their villages while paying large sums of money. Some have even entirely lost their savings and they are not going to come back just because you say jobs are open from tomorrow,” says Srinivasan.

In this backdrop, he believes that it will take four to 12 weeks for “this wheel to start up and get running”. It is not as if everybody is going to come to work because factories are open, especially when it involves units which are further down the automotive supply chain. These encompass smaller ancillary suppliers with low value-added manual jobs and the impact will be even more significant for them. In and around Chennai, continues Srinivasan, there is a large migrant population in these small and medium auto ancillary units. Likewise, the construction industry is also “largely migrant-driven” and a major provider of employment.

“Given that situation, whatever we do, the industry cannot crank up that quickly. And once we crank up, I do not know if demand is going to come back that quickly either,” says Srinivasan.

In other words, it is not just a question of production but also of demand which will take a few quarters coming through the system.

“It is anybody’s guess if it will be two or three quarters even while pessimists are talking of six quarters. We have to see it day by day,” says the TVS Motor Chairman.

No wonder he describes this as “an unprecedented situation” where the whole world has been compelled to opt for a lockdown. India was no exception to the rule either.

“When Covid first struck, there was nothing known about it and we had to take drastic action to protect our society. A few months have gone by and serious studies have shown that there is going to be no quick breakthrough in a vaccine,” says Srinivasan.

The good news for India is that the fatality rate is “very, very low”, unlike North America or Europe which have seen “huge losses of lives”. The next step, according to Srinivasan, is to evaluate the “cost of livelihoods lost versus lives lost” and the right thing to do now is to gradually and selectively open up the economy.

“However, this has to be done with care, especially if there is a big spread and hence the need for a phased/gradual manner,” he says. It is also clear now that it is better to quarantine the vulnerable part of the population rather than the whole country.

“If you look at big cities — and infections are coming from a dozen of them — and with migrant labour getting back home, there is a risk of this virus spreading in villages,” cautions Srinivasan. For now, infections are on the rise and it remains to be seen how the numbers pan out in the coming weeks/months.

WFH positives

From TVS Motor’s point of view, the entire exercise of working from home has had some interesting positives. “We are seeing a lot of staff functions that are not needed any more. Similarly, area and regional offices are not needed either since many of the people here can work from home,” elaborates Srinivasan.

Likewise, travel can reduce by up to 50 per cent on an average, especially air travel, which “will come down dramatically”. As he puts it, there is so much time lost going to the airport, being screened amid tight security before flying out and then spending time on the road all over again before reaching the final destination.

“We now realise that any time we went to meet someone for an hour, we ended up travelling seven hours from Chennai to either Mumbai or Delhi,” says Srinivasan. Now, with digital taking over in the Covid-19 world, many meetings can be done comfortably online.

Yet, it is not as if the physical part will be taken over completely since “you also need to see people in board meetings and their body language”, especially if someone is objecting to a certain proposal. “You need to look at the response of the people who are listening and cannot take a decision based on someone who is just speaking,” cautions Srinivasan.

This is the limitation of video conferences, where one only sees the person who is speaking. “All meetings cannot happen online,” he reiterates.

According to Srinivasan, it is also difficult to predict all the changes that will happen in a post-Covid world. One school of thought subscribes to the belief that everyone will be hesitant to travel by public transport and private ownership of cars and two-wheelers will grow.

“I would rather wait and see whether shared mobility will come down,” he says. It is very likely that, after a year, customers will be more inclined to saying something like: ‘To hell with it, let’s get on with our lives’.

From Srinivasan’s point of view, the positives will be better hygiene standards at least till the fear lingers and some paranoia persists. Likewise, he adds, personal space/distancing will grow with hugging and physical displays of affection taking the backseat.

On the business side, digital buying of vehicles will increase and customers will be happier to check out road tests, spec comparisons and reviews online before zeroing in on a certain car or two-wheeler. This will save needless trips to dealerships.

There has been a lot of debate on the excessive dependence on China as a single supply point for sourcing components especially during the pandemic. More recently, geopolitical tensions have peaked with the US, Australia and some European nations clearly livid with China for, what they feel, its alleged role in unleashing Covid-19 on the world.

According to Srinivasan, long supply chains are going to be suspect going forward and manufacturers will have to produce some significant quantity in the free trade region where they will be selling products. For instance, this does not have to be the US, but Canada or Mexico.

Drawing the Chinese

He also cites the example of TVS Motor which, two years ago, decided to go in for a de-risk strategy in sourcing from China. There was no Covid-19 in sight then but many of its Chinese suppliers relocated to India following a carefully thought out plan.

“We felt that there were a dozen parts which came largely from China,” says Srinivasan.

Even if the value was merely 10-12 per cent, it just meant that a bike could not be produced without them. “We took a decision that they had to be made here and it really helped us,” he says.

While the lockdown pretty much ensured that the wheels of industry came to a grinding halt, the fact remained that the China shutdown was “no threat to our production at all”. This was not true for other automakers, which felt the pinch when supplies from China were cut off.

With Covid-19, the need to produce closer to home has also become more pronounced. From the industry’s point of view, the pandemic has posed a huge risk in terms of wreaking havoc across the supply chain. Shutting down borders, logistics, transport and so on have only made the situation more complex in India.

The good part is that the lockdown has seen cleaner air and rivers, which only reinforces the need to keep this going even after economic activity resumes optimally in the coming weeks. Srinivasan thinks this is also a good opportunity for the Centre to spend more on the Swachh Bharat Mission where 20 cities, for instance, can be earmarked for a zero pollution drive.

“We need rigid enforcement of laws in sewage treatment. Small industries were releasing untested sewage and this is a wakeup call for the country to take Swachh Bharat seriously in terms of recycling, cleaning and reuse,” he says.

For the auto sector which has made big investments in Bharat Stage-VI emission standards, the key is to continue the effort towards cleaner mobility. “There was some degree of over-enthusiasm to go all electric in two years, which is just not feasible,” says Srinivasan.

It is his view that the world will take a couple of years to get back to normal in an L-shaped, and not V-shaped, recovery curve. “It is an opportunity to reset use of people, buildings, energy, travel and everything in life. How much less can we live with in terms of eating out, having simpler food, not buying as many clothes or having as many haircuts!!” he laughs.

Published on May 28, 2020
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