Covid-19 impact on Automobile Industry

COVID-19: 2300 Cr/Day Loss Suffered By Indian Automobile Sector

Indian Automobile Sector facing huge drop in sales after world hit by Covid-19 and battling hard to get back to track again, 47+ lakhs drop in sales, 3.5 lakhs employment cut made industry to suffer more in first time in history.

According to a parliamentary panel report sent to Rajya Sabha Chairman M Venkaiah Naidu on Tuesday, the Indian automotive industry suffered Rs 2,300 crore loss every day and an overall employment loss in the sector was around 3.45 lakh due to the aftermath of the ongoing Covid-19 pandemic and subsequent lockdowns.

A  slew of measures has also been recommended by the Parliamentary Standing Committee on Commerce, headed by Telangana Rashtra Samithi (TRS) MP Keshav Rao, to encourage investment in the country’s automotive industry, including the reform of current land and labour laws.

Upsurge in Unemployment:

  • The committee was told by the organizations of the automobile sector industry that all the major original equipment manufacturers (OEMs) had reduced their production by 18-20% percent due to low demand and decreased vehicle sales after Covid-19 pandemic.
  • As a consequence, the job situation in the automotive sector was affected and the approximate loss of employment in the automotive sector was 3.45 lakh, the panel said in its report. In the car industry market, the recruiting of manpower has been halted.
  • Besides that, 286 auto dealers have been closed. Also, production cuts in the automotive sector have a percolating negative effect on the component industry that adversely affects the production of automotive spare parts by Micro, Small and Medium Enterprises (MSMEs), the report states. 

Risk For Automobile Sector In The Coming Years:

  • The production stoppage at the automotive OEM and component supplier due to the COVID-19 pandemic and subsequent lockdowns, as informed by the Automobile Industry Associations, resulted in a loss of approximately Rs 2,300 crore per day for the automotive sector,” according to the report.
  • Furthermore, the Standing Committee reported that the exact severity of the effect depends on the duration of the lockdown time, the intensity of the COVID-19 outbreak and the degree of dissemination.
  • Considering the crisis, the automotive sector is expected to undergo at least two consecutive years of significant contraction, leading to low levels of capacity usage, lack of potential investment in CAPEX, high risk of bankruptcy and job losses across the entire value chain of the automotive industry, the committee said.

Automobile Domestic Sales Trends

Below table clearly shows huge drop in sales of automobiles compared to 2020 and 2019 session year. We see total 47+ lakhs vehicles drops in sales in 2019-20. Which is really really huge.

In this table below see, subsequent growth in sales in automobiles year-on-year until 2018-19. But 2019-20 drop in sales sent the industry back to 2016-17. This is the reason for production and employment cut.

Category2014-152015-162016-172017-182018-192019-20
Passenger Vehicles2,601,2362,789,2083,047,5823,288,5813,377,3892,773,575
Commercial Vehicles614,948685,704714,082856,91610,07,311717,688
Three Wheelers532,626538,208511,879635,6987,01,005636,569
Two Wheelers15,975,56116,455,85117,589,73820,200,11721,179,84717,417,616
Quadricycle# 000627942
Grand Total19,724,37120,468,97121,863,28124,981,31226,266,17921,546,390
Automobile Domestic Sales Trends by SIAM

Sales record history by SIAM.