Notwithstanding the current negative fallout of the virus pandemic, the long-term prospects of the Indian automotive industry will continue to be good, states Nikhil B, Vice President (Marketing and HR), Madhus Garage Equipment
Impact on Business and Recovery Strategy
We have followed the government norms and locked down our entire company. We have many people working from home, logging in customer service complaints, if any. We have been a financially conservative company and we are thankful we are not owed money from the market or owe money to any financial institution. For now, we are in a financially stable situation but like every other company we are dealing with cash flow issues. When the lockdown ends, our first priority will be to ensure we are able to service our customers and help them get back on their feet. The immediate challenge will be to deal with a suddenly heavy service load due to all the tyre shops and workshops opening up after six weeks of lockdown.
BS VI Transition
The BS VI transition is a very good move for the benefit of the health of the nation. The new technology used by many companies like a DPF, Adblue, etc. are bringing India on par with the developed world. These new technologies need some special equipment to service the cars. There is also a substantial demand for exhaust gas extraction in heavy duty workshops. This will increase the infrastructure expenses for most workshops, but since it’s compulsory, many workshops may opt to go for cheap half-baked solutions which could create problems in the long run. The substantial price increase in all automobiles thanks to the BS VI transition is going to be a tough pill for the consumers to swallow. The market was already slowing down and a price increase at this time is unfortunate.
Expectations from Government
The government has to support business like us by ensuring that banks and financial institutions give us cash for working capital at zero interest rates. The government has to ensure the policies they announce are implemented down the line and consumers have to have access to cash and finance. The government has to financially help the industry retain jobs.
Outlook: Present and Future
It is very difficult to predict anything for this year. If by some miracle the lockdown ends by the end of May, we would hope to at least match the turnover we did last year and that itself would be a big success. The next year will depend on the recovery of this year. The automobile industry this year is going to be even worse than last year as the banking crisis is still ongoing. The Yes Bank kind of headlines are replaced with the virus pandemic headlines, but the banks still have a ton of non-performing assets and given the current economic situation would be even more careful in lending money for purchases like cars and bikes.
When the automobile industry goes down, all associated industries like garage equipment, commercial vehicles, components will also suffer. The only hope for our industry, which may not be good for the environment or congested cities, is that due to the fear of catching the virus, many people may avoid public transport wherever possible and start driving their personal cars more. These could be local trips or outstation drives.
People who would typically take a train or an overnight bus to nearby destinations may choose to spend more money but drive their own cars. If this happens, the service business in car workshops, tyre shops could see a slightly quicker recovery and this in turn could help garage equipment companies like us. While we say this, we are well aware of the negative impacts of more personal car use on the environment and the congestion in big cities, which are ever-growing issues.
Medium to Long Term Impact
The short to medium-term impact will of course be negative. However, we don’t see the pandemic having a long term-negative impact. For the next two to three years, till a vaccine or cure is developed or herd immunity comes into effect, well-read, urban people will be cautious. Beyond that, they will get back to what we consider as normal. The Indian car ownership per capita is still extremely low compared to many other economies and this will continue to grow over a period of time. People will always want to buy new cars, upgrade their cars and hence we think the long-term prospect for our industry is still very bright.