The representing bodies of the automotive industry – Society of Indian Automobile Manufacturers (Siam), The Automotive Component Manufacturers Association (Acma) and The Federation of Automobile Dealers Associations, India (Fada) – have jointly appealed to the Ministry of Home Affairs, Government of India, to allow the industry to resume operations in complete unison.
The presidents of industry associations Siam, Acma and Fada have submitted a joint letter on Friday. The letter is addressed to Ajay Kumar Bhalla, home secretary, Ministry of Home Affairs, Government of India.
On the evening of May 1, the Ministry of Home Affairs extended the nationwide lockdown for a further period of two weeks with effect from 4 May.
Several leading automakers such as Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra & Mahindra Ltd and others have reported nil domestic sales for April on Friday.
The auto industry bodies have appealed to the Home Ministry to let the auto value chain operate including vehicle manufacturers, component suppliers, dealers, service workshops, and the regional transport authorities.
“The industry needs to be treated akin to 'essential services’ and be allowed to function as has been done in case of steel and cement sectors," the industry bodies said in the letter.
The lobby bodies have warned the government representatives that several component suppliers and the dealerships may not be able to sustain stress and close down.
“The sector is losing revenue to the tune of ₹2,300 crore per day. Starting of economic activity in the sector is therefore critical and the only hope to infuse life back into this once vibrant industry," it said.
Industry representatives worry about the financial stress that includes maintaining decent working capital, building fixed costs including interest on loans and others may force several small and medium suppliers as well as dealers into closure.
The auto industry was already witnessing a demand slowdown for the past 15 months when the covid-19 crisis struck and brought all manufacturing, supply chain and retail operations to a grinding halt.
The letter drafted by the lobby bodies mentions the complex and integrated nature of the auto industry.
“A vehicle manufacturer cannot commence operations if any one of its suppliers is unable to undertake production," the document said adding that the vehicles produced would add to the inventory for the dealers thus blocking their working capital especially when there are no retail sales.
“It is therefore pertinent to note that, if any element, in any segment does not commence operations, the value chain will not be able to re-start," it added.
Seen as a driver of economic growth, the $120 billion auto industry contributes 7% to India’s GDP and 49% to the country’s manufacturing output. It employs more than 3.7 crore people with direct and indirect jobs. The industry also exports $27 billion worth of vehicles and components annually.