The automotive industry in India has already been reeling under significant pressure to cope with plummeting vehicle sales for over a year now as also transitioning from BS IV to BS VI.
27 Mar 2020 | 5173 Views | By Autocar Professional Bureau
As India continues to be in a nationwide 21-day lockdown to contain the spread of the Covid-19 pandemic, the Automotive Component Manufacturers Association (ACMA) has created a taskforce which is evaluating the possibility of manufacture of facemasks, hand-sanitisers by its members.
Several of the component companies have shown keen ...
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As India continues to be in a nationwide 21-day lockdown to contain the spread of the Covid-19 pandemic, the Automotive Component Manufacturers Association (ACMA) has created a taskforce which is evaluating the possibility of manufacture of facemasks, hand-sanitisers by its members.
Several of the component companies have shown keen interest to manufacture these items. Specifically, for ventilators, members are evaluating the option to import them through their CSR funds. The industry also seeks guidance from government on the standards for such equipment and the quantity needed.
Commenting on this situation Deepak Jain, president, ACMA, said, “The Auto Component industry stands by the Government of India in this hour of challenge. However, with complete stoppage of production in the vehicle industry and scarcity of working capital, the situation in the component manufacturing units, including the tier-2s and tier-3s has become quite acute, threatening their survival. We have requested the government for helping us with immediate relaxation of borrowing norms and statutory payments, extension of moratorium on payment of principal and interest of loans for a year, among others. We are also seeking support of SIAM and the OEMs to ensure minimal disruption of the supply chain.”
The ACMA wishlist
The automotive industry in India has already been reeling under significant pressure to cope with plummeting vehicle sales for over a year now as also transitioning from BS IV to BS VI. The industry is now faced with the Covid-19 pandemic as well which now threatens to destabilise the value chain. According to ACMA, the situation is even worse for small and medium firms whose solvency is being challenged. To avoid such a scenario, ACMA has requested the government for the following:
- Support for working capital – relaxation of borrowing norms and statutory payments
- Norms for NPA recognition to be eased by extending moratorium on payment of principal and interest by at least 1 year
- Relaxation in fixed electricity charge
- Relaxation in of levy demurrage charges for at least 7 days for import cargo clearance
Auto Component manufacturers, especially the Tier-2s and Tier-3s are facing hardship in terms of cash flow, which if not immediately addressed will lead to insolvency of several companies. Further, there is no clarity on how the market will pan out in the ensuing months, thus further eroding the industry’s confidence. It is estimated that the component sector is facing production loss of Rs 1,000 – 1,200 crore per day.
The Auto Component Industry contributes 2.3% to India’s National GDP, 25% to national Manufacturing GDP and employs over 50 lakh people. In 2018-19, the turnover of the industry stood at US $57 billion with US $15 billion in exports. The sector exports to almost all of world’s leading vehicle manufacturers and Tier 1s, which speaks of its strong capabilities and global competence. The industry dominated by SMEs, is one of the key drivers of India’s economic growth and the ‘Make in India’ program.
Covid-19 precaution
Meanwhile ACMA has issued an advisory to all its members to maintain safety and security of all permanent and contractual employees, ensuring no layoffs and timely salary for the month of March. In fact, over 100,000 contractual employees have already been paid their salary for March. Further, several of the component manufacturers have promised to extend full medical aid to their employees, including contractual, in the eventuality of them or their family members contracting the Novel Coronavirus.
Many auto component companies are also running community kitchens to ensure their contractual employees get regular food.
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