Road To Recovery

Road To Recovery

Editor's Desk July 2020 Road To Recovery

Dear Readers,

For an industry that was reeling under the severe impact of a virus-induced lockdown, the sales figures for June 2020 brought some respite, and hope of some recovery over the next few months. The unprecedented washed-out April, followed by a short window for sales in May, was followed by a positive sales outcome in June, albeit they were nowhere close to the numbers of the corresponding month last year.

Overall passenger vehicles, comprising passenger cars, utility vehicles and vans accounted for 105,617 units last month as compared to 209,522 units in June 2019, resulting in a 49.59 % drop in overall sales in the segment. The likewise comparison in the two-wheeler segment saw a fall of 38.56 % to 1,013,431 units in June 2020 as compared to 1,649,475 units in June last year. Quarterly figures, understandably so, portray a rather dismal picture. Data released by SIAM reported a 75.49 % drop in overall sales across all vehicle categories, with the sharpest fall noticeable in the M&HCV segment at 94.08 %.

Although there is guarded optimism within the industry about a slow but certain recovery, most believe the road to recovery would be arduous, and will require organisations to be patient and be prepared for gruelling times ahead. This is the time to focus on building robust business models, said Deepak Jain, President, ACMA in one of Auto Tech Review’s CXO discussions last month. The COVID-19 outbreak exposed the supply chain vulnerability, serving a wake-up call for the industry. During the same discussion, Ganesh Mani S, Director – Production, Hyundai Motor India spoke about how the company utilised the COVID-19 times to devise the ‘innovative qualitivity’ strategy that analyses its sales, revenue and productivity norms.

The general sense within the industry is that it would take about four years to touch the demand levels of 2018. The discovery of a vaccine for the novel coronavirus, and subsequent immunisation, leading to opening up of all business and economic activities, would likely bring back consumer confidence much faster. The industry resilience is being tested to the core, and as Dr Arun Jaura, Managing Director, Michelin India Technology Centre said in our CXO discussion, the future will not be about leap-frogging, but pole-vaulting.

The sector has been demanding immediate government intervention, particularly with the demand to reduce GST on automobiles from 28 % to 18 %. Rajan Wadhera, President, SIAM in an interview to my colleague recently said the industry today runs the risk of de-growing up to 50 % in the 2019 and 2020 timeframe, which will push the sector back by a decade to the lows of 2008-2009. For a sector that contributes close to 50 % of the country’s manufacturing GDP, the government can ill afford to ignore this.

July 2020, New Delhi