The Covid-19 crisis brings forth an opportunity for the domestic auto industry to become an alternative to China.
13 Apr 2020 | 11435 Views | By Autocar Professional Bureau
The Covid-19 pandemic has brought the world to a standstill. The devastating effect of this crisis on economies including India is visible with the impact only expected to increase in the coming months.
Nomura Research Institute (NRI) Consulting & Solutions India says the Indian automotive industry makes up about ...
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The Covid-19 pandemic has brought the world to a standstill. The devastating effect of this crisis on economies including India is visible with the impact only expected to increase in the coming months.
Nomura Research Institute (NRI) Consulting & Solutions India says the Indian automotive industry makes up about 50 percent of India’s industrial GDP and is one of the biggest employers both through direct and indirect employment. As part of understanding the present and future scenario on the back of Covid-19 impact, Nomura put across a detailed study on the ways in which the industry can restart operations to cushion out the impact to some extent. The company says while scenarios of the impact have been well documented by both national and international bodies and firms, its report dwells on the challenges at a micro-level across the stages of the automotive value chain in India and suggests suitable solutions that could be incorporated to run operations.
The report identifies the challenges faced at each stage of the value chain – product development, procurement, manufacturing, finance, logistics, sales, marketing and aftersales, based on the context and configuration of each of the stages for different players. It suggests a set of strategic imperatives for each of the aforementioned subsets, clearly defining the immediate focus and the subsequent steps that will help stabilise and eventually bring the automotive sector back on track once the lockdown is relaxed.
The findings highlight that this crisis brings to the fore an opportunity for Indian auto part makers increase their participation in the global value chain by becoming an alternative to China in the changing geopolitical world order and for this in some cases, a technology acquisition maybe imperative. Given the financial distress across the world, the more financially sound players in the country could also acquire firms and technologies in this period and that would help position them as effective alternatives while also furthering the true Make in India spirit.
Nomura’s key recommendations:
Ashim Sharma, partner and group head – Business Performance Improvement (Auto, Engineering & Logistics), NRI (Nomura Research Institute) Consulting & Solutions said, “Evolving product features based on emerging hygiene and disinfection needs, localisation, increased degree of automation, digitisation and innovations in financing, and a set of economic stimulus by the government are the needs of the hour that will see us through this crisis. A clear guideline and policy for safe working similar to running of hospitals to start work at factories, interstate movement of goods, reduced interest rates, adequate moratorium period, demand generation through fiscal and non-fiscal measures such as subsidies and scrappage policy, and last but not the least, a massive push to the ‘Make in India’ campaign will prove to the key differentiators for Indian automotive sector in the post lockdown phase.”
Digitalisation across value-chain
However, the report leaves a caution that despite all measures, an infection can still seep in and in order to manage and contain that, the most essential thing will be traceability right from the part being made at a supplier site to the truck carrying it to the people working on it to finally the vehicle it goes into and the sales agent who sells the vehicle. Therefore, use of technology to get a digital signature of not just the part but also the personnel coming in contact with it will have to be maintained across the value chain so that a quick and effective containment can be carried out in case of an infection.
Nomura says irrespective of the scenario that will prevail eventually, the ‘new normal’ is what the automotive industry should be prepared for once the crisis is over. “In a nutshell, we need to live with this new normal and while saving lives is and should be the primary objective, we must implement strategies to ensure livelihoods can also be saved to limit the devastating effect it could have on the millions in our country as well as the positioning of our country in the global ecosystem,” added Sharma.
The report summarises with an appeal to the government to help in creating enabling conditions both through fiscal and non-fiscal means. One of the key things it recommends is a clear-cut guideline arrived at in conjunction with medical and health experts in what can be and what cannot be allowed. In addition, consistency on policies related to safety, emissions, etc. to avoid undue stress and continuity of business plans and stimulus packages to catalyse the restart of the industry.