China disruption affecting Indian auto supply chain, says SIAM’s Rajan Wadhera
If the coronavirus would not have been there then the degrowth in February for passenger vehicle segment would have been nominal, said Vinkesh Gulati, VP of Federation of Automobile Dealers Associations (FADA).
As coronavirus cases spiked over the weekend, concerns mount for the auto sector that is already reeling under a host of issues. The sector is likely to face supply disruptions from China due to the virus.
To discuss the issue in detail the impact of the virus crisis on the auto and auto ancillary space, CNBC-TV18 spoke with Rajan Wadhera, president, Society of Indian Automobile Manufacturers (SIAM) and Vinkesh Gulati, VP of Federation of Automobile Dealers Associations (FADA).
According to Wadhera, China disruption is affecting Indian auto supply chain. “We have not been able to make any assessment in terms of the numbers that are going to be lost but individually, quite a few of them have been affected by the supply chain disruptions that are occurring because of coronavirus problem particularly in the area of Hubei and the logged down that happened in China,” he added.
Talking about BS-VI transition, Wadhera said, “The state of Hubei, Wuhan area is largely an auto hub area. We are having inventories but as these inventories deplete and the problem starts surfacing on the BS-VI supply where there is no mandate of an early start but the mandate is only on BS-IV. So to that extent, finishing of BS-IV stocks is not really linked to coronavirus issue.”
“Although, some of us have had problems of non-availability of BS-IV parts and therefore we cannot make BS-IV vehicles and so the inventories which are mismatched will have to be written-off. I am sure some individual companies will go to court and request for an extension of about a month to produce BS-IV vehicles and be able to sell them,” added Wadhera, adding the risk is not so much on BS-IV parts but more for starting off BS-VI because there new technologies are involved. There could also be supply disruptions for gasoline BS-VI parts, he said.
Gulati said that February also hasn't been that great with regards to sales. Customers seem to be shying away from purchases despite discounts.
According to Gulati, customers are still holding back purchases expecting a fire sale in March.
Talking about coronavirus impact on auto space, Gulati said, “The affect is more on the production side and if the virus wouldn’t have affected we would have got some more BS-IV vehicles, which are in demand as of today also because of schemes and discounts.”
According to Gulati, if the coronavirus would not have been there then the degrowth in February would have been nominal. "In January, the degrowth in passenger vehicle was 4.7 percent and we were expecting that to continue but now the degrowth could go up to 7 or 10 percent.
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