Powered by
Sponsored by

Year-ender: COVID was only one among a litany of woes for auto sector

Covid helped the sector to go in for drastic rationalisation of costs, digitalisation

Indian-auto-automotive-sector-industry-cars-traffic-representational-shutterstock Representational image | Shutterstock

Covid did not spare India's auto sector. Yet, the beleaguered industry had other worries galore through 2020. In hindsight, the pandemic and the downturn it caused was only one among a litany of woes to befall the sector through the year.

Though Covid did ravage the automobile market in the country in an unprecedented manner—April 2020 was, perhaps, the first time in history that 'zero sales were clocked by car makers—it did have some silver linings, too. In a lot of ways, the industry believes that the breakout and its easy nature of transmission has helped in a rethink amongst middle class Indians on the requirement of a personal vehicle. Right since the sales decline started two years ago, the industry had blamed the move, particularly of millennials, to using cab aggregators and public transport modes like the Metro as one of the core reasons. That may have been stemmed, at least for now. Covid also helped India's auto industry to go in for drastic rationalisation of costs, go in for digitalisation, and look for newer business models like selling online as well as subscription models.

Looking back at 2020, while Covid was a black swan event which impacted it across the board, the auto industry did have its fair share of bigger worries. First and foremost would still be the protracted period of decline in sales, attributed to the overall slowdown in the economy. In fact, except for the Navratra-Diwali festive periods every year, vehicle sales have been falling ever since 2018s rainy season. This makes it the longest period of auto sales decline in its history.

While the industry has seen some amount of sales picking up following the easing of lockdown restrictions, the worry is whether it was all pent up demand and festive season sale, and whether it will go down once December is over. 䶤has been a challenging year for the auto sector,”admits Manish Bhatnagar, managing director of SKF India, an auto component company.

“Two-wheelers and tractors have performed well as far as the growth is concerned. On the other hand, commercial vehicles (CV) have continued to struggle with growth,”he adds. The lack of revival in CV is telling—when commercial vehicles like pick-up trucks, minivans etc get sold, that means business activities like construction, transport of goods, deliveries, etc are happening. Their sales remaining down means the opposite. The overall drop in sales this financial year so far (April to November) has been 26 per cent.

Regulatory requirements like BS-6 was the biggest concern for automakers going into 2020, as a Supreme Court ruling had made the tough emission norm mandatory for all vehicles sold in India from April 1, 2020. This made auto manufacturers invest huge amounts of money in the technology, even driving up the final cost for many models. While the pandemic made the BS-6 switch sort of a non-news, it is believed that it has been a mixed bag for many car and bike makers.

Other regulatory requirements also plagued the industry. The government has had no qualms in promoting Electric Vehicles (EV) right through the downturn, worrying traditional combustion engine car makers to no end. Other new requirements, from FASTag to high security number plates (some states have started cracking down on this), ISI helmets (mandatory from June next year) popped up through the year. The latest directive from the Road Transport ministry will also send automakers back to their drawing boards –all vehicles are to have airbags for both front seats, announced this week.

Two of the big auto casualties of the year were Honda and SsangYong. The Korean auto company, owned by Mahindra, filed for bankruptcy after it failed to pay back a loan. Meanwhile, Honda cars shut down one of its two manufacturing plants, citing ''unpredictable'' market conditions. Another significant withdrawal is General Motors completely shutting its last operational plant in India, in Pune. Though GM had stopped selling cars in India much earlier, the plant was manufacturing cars for export.

Even while India's auto industry gingerly steps into 2021 with cautious optimism, worrisome warning bells are already clanging. Almost all car and bike models will see an increase in prices, mainly due to rise in steel prices. What impact it will have on an industry pummelled by wave after wave of bad news remains to be seen.

📣 The Week is now on Telegram. Click here to join our channel (@TheWeekmagazine) and stay updated with the latest headlines