Govt stimulus is key to survival, says auto industry1 min read . Updated: 08 May 2020, 01:48 AM IST
Industry stalwarts delve into the key issues that have affected the sector amid a covid-19 outbreak, in the first of a series of webinars from Mint’s Pivot or Perish campaign
In the first in a series of webinars from Mint’s Pivot or Perish campaign, automobile industry stalwarts comprising Maruti Suzuki India Ltd chairman R.C. Bhargava, Confederation of Indian Industry president Vikram Kirloskar, Society of Indian Automobile Manufacturers (Siam) president Rajan Wadhera and MG Motor India president Rajeev Chaba delve into key issues affecting the sector amid a pandemic.
Stimulus is a must
The Centre should immediately deliver a stimulus to revive demand as firms can’t survive with 50% capacity utilization, given the high fixed costs. The stimulus can be through a cut in goods and services tax. In addition, higher spending on infrastructure sector will boost demand
Several auto firms may move production bases to rural pockets for manpower needs, since a large part of the migrant workforce has returned to villages and may not return. The government should encourage companies that are looking to relocate plants.
EV story is here to stay
Despite setbacks, electric vehicle plans will remain in the forefront of business strategy as consumers have become used to low levels of pollution due to the lockdown. Some companies will continue to innovate to make EVs more affordable. Segments such as two- and three-wheelers may see faster electrification.
Bumpy road ahead
Companies will be forced to cut fixed costs as production is unlikely to return to pre-covid levels before June 2021. Companies with cash reserves will manage for the next few months, but the auto sector, by and large, will see large scale layoffs in the next few years.
This is first in a series of webinars in the Pivot or Perish campaign, which looks at how the covid-19 pandemic is prompting top companies to reinvent their businesses.