The post pandemic situation will witness the onset of ‘new normal’ changes in the automotive sector, says Mr Deepak Jain, CMD, Lumax Industries
Impact on Business and Recovery Strategy
The automotive industry in India has already been reeling under substantial pressure while coping with plummeting vehicle sales for over a year. This is compounded by the fact that the industry is transitioning from BS IV to BS VI and has made significant investment. The onslaught of the current virus pandemic now threatens to destabilize the entire automotive value chain. In fact, the pandemic is creating socio-economic disruptions not witnessed in centuries. Every industry has been impacted adversely, including the automotive industry. The economic impact has been massive, but it has been of prime importance to ensure the safety and well-being of our people.
We have been following the government’s directives and guidelines to make sure that all our employees are safe and secure. Our teams have been working from home, an absolutely new way of working which is now the ‘new normal’. All these teams are aligned with the company’s business objectives and are preparing themselves for the start of operations. The management teams are drawing up business continuity plans for the post lockdown period. This includes revised strategy, conservation of cash, and collaborating with partners, customers and suppliers to sail through this difficult period. We are also in touch with our customers and the OEMs and resumption of our operations would be aligned to their commencing operations.
BS VI Transition
BS VI has pushed the industry to think out of the box, innovate and improvise. However, the onslaught of the pandemic has forcefully impacted and impaired the business scenario due to the lockdown, thereby leading to a plummeting demand. The BS VI transition will increase the cost of owning a vehicle.
Expectations from Government
We stand firmly by the government in this hour of crisis while abiding by its directive. The aspects of health, safety and welfare of our employees are foremost in our minds. The automotive value chain is highly complex and an integrated one. With nil revenues the automotive component industry in the lockdown period has deepened the state of crisis in the industry and several enterprises are staring at insolvency. We urge the government for urgently infusing financial stimulus based on the recommendations proposed by the Automotive Component Manufacturers Association (ACMA) to ensure that the industry can move ahead with safe and sustainable operations post the lockdown.
Outlook: Present and Future
There is no clarity on how the market will pan out in the ensuing months and so it is difficult to forecast for the entire year, let alone the following year. The automotive component manufacturers, especially those in Tier II and III, are facing severe hardship with respect to liquidity and cash flow, thus impacting business continuity and survival.
Medium to Long Term Impact
New rules of the game will apply post the pandemic scenario. Financially, balance-sheets will be stretched and it is certain that the impact will be adverse. Stronger action on cash conservation and cost optimisation in the interest of the organisation and its people is advisable. It would be important to re-calibrate the organisation to be more flexible, agile and tenacious to adapt to the unforeseen future challenges. The ‘new normal’ will include multiple business scenarios built by strategy teams, deployment of austerity measures and behavioural and structural changes at the workplace. Maintaining physical and social distance, virtual meetings and less travel will be the new features.