Automakers unlikely to go full throttle amid Covid-related uncertainties

While most have resumed production, ramp up will be staggered one and will be a third of the levels in January and February

Automakers in India are adopting a slow calibrated approach to ramping up production amid a high number of Covid-19 cases, parts and raw material shortage and demand uncertainty, said officials at auto firms and component makers.

Earlier this month, several of them including car market leader, Maruti Suzuki India, Hero MotoCorp, Honda Motorcycle and Scooters India, Honda Cars India, Toyota Kirloskar Motor, Tata Motors and Mahindra and Mahindra, had undertaken plant closure amid the raging pandemic.

While most of them have resumed production, the ramp up will be staggered one and will be a third of what most of them manufactured in January and February.  

Shashank Srivastava, executive director –sales and marketing at car market leader, Maruti Suzuki India said the ramp up will be governed by how quickly the restrictions are lifted. Among other things, the extension of the lockdown by several states till the first week of June, has also added to the uncertainty and will impact retails, he said adding that “States under lockdown currently account for 80-85 percent of sales.”  Add to that the supply side issues.

“When we ramp up, many issues will have to be tackled,” said Srivastava declining to comment on the company's production schedules.  Unlike last time, this time around, the rural markets also affected.  However, the silver lining is forecast of a good monsoon, healthy wheat procurement and better Rabi sowing, he pointed out.

Owing to the challenges posed by the second wave of the pandemic, I.H.S Markit – sales and forecasting and market research firm has pared its forecast of light vehicle sales for the Indian market from 3.65 million earlier to 3.5 million now, said Puneet Gupta, associate director at the firm. “Barring a few, most manufacturers are running single shifts due to employee absenteeism, shortage of parts, and raw materials.  We don’t see demand coming back as sharply as it had after the first wave,” said Gupta.  

An official at a component manufacturer aware of production plans of Maruti, Hero MotoCorp and Honda Motorcycle and Scooter India (HMSI), said Maruti produced a total of 45,000 cars this month and plans to scale it up to 165,000- 170,000 in June. Hero, which made 120,000 to 150,000 units this month, plans to increase it to 450,000 units next month.

HMSI, which made only a few thousand units this month, is looking to scale it up to 320,000 to 340,000 units next month. Both Tata Motors and Mahindra have clipped next month's schedule by 20-30 percent from the January and February levels, said an official at a Pune based auto part supplier.

The aforementioned schedule however, is subject to change given the shortage of raw materials like steel, plastic parts, semiconductors and diversion of oxygen for medical purposes. The pain for the commercial vehicle segment will linger longer.

“May has been a challenging month in India and we expect June to continue this trend,” said Sandeep Khullar, General Manager Off-highway & Commercial Vehicles at Dana India, alluding to commercial vehicles (CVs) Dana supplies components to CV. While demand from the Agri sector has been very strong, CVs have taken a hit, said Khullar adding that the production schedule of most CV makers is down significantly from what it was in the March quarter of the calendar year 2021.

Meanwhile, even as the automakers in the northern and western region are limping back to normalcy in line with the reduction in the number of Covid 19 cases, their counterpart in Tamil Nadu, are now facing pandemic’s wrath.  Plants in the state are suspending operations and reducing shifts as employees threaten to go on strike due to health concerns about Covid-19, Bloomberg reported on Tuesday. The state is among the worst-hit states, with infections fast-approaching 1.9 million and nearly 21,000 recorded deaths.

Renault Nissan Automotive India Pvt. is caught in a legal dispute with workers at its factory near Chennai, who say their safety shouldn’t be compromised to meet production targets. The workers have also challenged the state’s decision to exempt the auto industry from local lockdown rules, said the Bloomberg report.

 Hyundai Motor India has suspended operations in Chennai until May 29 after a spike in infections and a walkout Monday. The company “has always prioritized the safety, health and well-being of its employees,” it said in a statement.

According to E Muthukumar, president of a union representing Hyundai employees, seven workers at the automaker’s plant have died of Covid in the past month and 750 tested positive for the virus. He said there will be two shifts a day when the factory reopens on Monday May 31, instead of the usual three, Bloomberg reported. A Hyundai spokesman said there would be no such change, said the report.