Driving Out Of Darkness

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Driving Out Of Darkness
Rajesh Menon - 01 May 2021

Through the past few years, the automotive sector has shown a strong resilience. Battered by an unprecedented slowdown that originated before the Covid-19 pandemic, combined with various other impediments, the sector has been pushed back several years and it has a long distance to cover – from resilience to resurgence.

Long before the world heard of the word Coronavirus, the industry faced with the dual challenges of adapting to changing policies and regulatory measures and a cyclical downturn experienced by the economy.

In the dawn of 2020, just as the industry saw the ray of hope, the Covid-19 outbreak jolted the sector and since then the automotive industry has been managing to keep the ship afloat. Every player held their defences high and contributed constructively to face the most challenging period for the Indian automobile industry.

The Fiscal Went By

When the auto sector entered the financial year 2020-21, it was emerging from a decline in sales of 18 per cent in the previous fiscal. The production cost had amplified majorly as the sector invested heavily to shift from BSIV to BSVI emission norms. It meant heavier discounts to dealers and customers to clear the BSIV stocks in time. Even though auto companies were managing the costs, the impact of discounts on profitability was fairly steep.

The year began amid lockdown, and the effect of the pandemic on the economy and the sector needs no revisiting. With manufacturing and sales coming almost to a standstill, it took practically two quarters for the sector to revive its supply chains and push production, nonetheless, the pandemic was not the only reason for the slowdown. The sector is facing deeper structural issues, which require immediate attention.

The year 2020-21 was one of the worst phases for the industry with sales across segments hitting multi-year lows. The auto industry witnessed a de-growth of 13 per cent to 1,86,15,588 units as against 2,15,45,551 units a year ago.

An Age of Uncertainties

The second wave of the pandemic appears to be stronger and more impactful compared to first outbreak last year, and with it comes a host of uncertainties and capricious disruptions.  

The automotive sector understands the stiff challenges before the government to ensure public health, while reviving the economy, and has been appreciative of the government’s efforts and believes in the vision of the Atmanirbhar Bharat.

While its direct imports are not very significant, the auto sector has embarked on a journey of enhancing localisation across product categories and minimising its reliance on imports.

We would also continue to engage with the government on important policy interventions announced recently, including the Vehicle Scrappage Policy and the Production-linked incentive (PLI) scheme.  

In the context of the impact of Covid-19, the Industry has sought a breather before bringing in an additional set of regulatory norms.

In order to enhance our export potential, there is also a need to sign FTAs and PTAs with potential markets in Africa, South East Asia, Latin America, Gulf and the neighbouring countries. This will make the Indian manufacturers competitive against the competing countries, and help them export larger share of its production across the world.

Paving a Better Future

The Indian Auto sector looks forward to FY 2021-22 with hopes of putting a bigger and better show with sheer optimism, although a lot will depend on the political and regulatory developments. The constantly evolving regulations are often turning impediments for the sector in raising the numbers to the pre-pandemic levels.

Amid the surging second wave, it is extremely difficult to predict the future. How this year will pan out will be hard to forecast. The automotive sector’s single-minded focus is towards staying resilient, being adaptive, and working towards creating the future.

The author is the Director General, Society of Indian Automobile Manufacturers (SIAM)

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