In a major setback to the automotive industry, auto manufacturing has not been included in the list of activities that will be allowed after April 20. A day after Prime Minister of India Narendra Modi announced an extension of the nationwide lockdown to May 3, the Ministry of Home Affairs has issued a notification with a new list of activities allowed under the lockdown starting April 20. Industry experts expected auto manufacturing to make the cut since it is one of the biggest contributors to the nation’s GDP.
The decision of the Ministry of Home Affairs seems to have overridden the recommendations provided by the Ministry of Commerce. The Ministry of Commerce had earlier written to the Ministry of Home Affairs with suggestions to widen the scope of activities allowed within the lockdown. It suggested that big industries such as auto manufacturing should be allowed to commence operations on a limited scale. In its letter, the Ministry of Commerce deemed the activities “essential to improving economic activity (sic) and provide liquidity in the hands of the people”.
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The Ministry of Commerce had proposed big industries such as automotive manufacturing could commence operations with 20-25 % capacity in a single shift. Not allowing auto manufacturing during the extended lockdown period is a serious concern for automakers. As per estimates provided by the Society of Indian Automobile Manufacturers (SIAM), the auto industry in India is losing around Rs 2,300 crore every day due to lockdown. It may be recalled that most auto companies had shut down operations a day before the lockdown came into force from March 23, 2020. With the lockdown extended, cumulative losses of auto companies will be twice as that of earlier estimates.
The notification issued by the Ministry of Home Affairs does mention that industries operating in rural areas, i.e., outside the limits of municipal corporations and municipalities will be allowed to operate. In addition, the notification also states that manufacturing and other industrial establishments with access control in Special Economic Zones and Export Oriented Units, industrial estates and industrial townships will be allowed to operate, provided these establishments make arrangements for the stay of workers within their premises as far as possible and/or adjacent building.
Also, the transportation of workers to their work-place shall be arranged by the employers in dedicated transport by ensuring social distance. All this has to be done in compliance with the SOPs mentioned in Annexure ii of the notification before work can begin. However, according to the notification and revisions which have followed till date, in the list of industries which will be allowed to operate post the 20th of April, like others which have found mention, the auto industry has not been included specifically.
The latest extension of lockdown has created other problems for the auto industry as well. This extension will likely delay the deadline for BS-IV vehicle registration and also defer the window for sale available to automotive retailers to sell remaining BS-IV stock. This will require a new order from the Supreme Court that had earlier provided time till April 30 for such registrations. The 10-day window provided by the Supreme Court to sell BS4 models will also have to be deferred.
Even during the lockdown, automakers have come up with innovative ways to boost their sales. Many companies have launched online sales platforms that allow customers to buy their vehicle online. Customers have the option to take delivery at the dealership or get the vehicle home delivered. Customers can also opt for finance options, offers, and exchange services, all of which are processed online. However, deliveries of products will only commence after the current situation eases out.