Allow entire value chain to resume operations in unison: Auto sector bodies

In a joint representation to the Home Secretary, the apex auto bodies of the country also highlighted that the sector is losing revenue to the tune of
The apex bodies of Indian auto industry underscored the contribution of the sector to the country's GDP and employment. (File photo used for representational purpose only).
The apex bodies of Indian auto industry underscored the contribution of the sector to the country's GDP and employment. (File photo used for representational purpose only).

Three industry bodies of the automotive sector, SIAM, ACMA and FADA, on Friday asked the government to allow the entire value chain in the auto industry to re-commence operations in unison.

In a joint representation to Home Secretary Ajay Kumar Bhalla, the Society of Indian Automobile Manufacturers (SIAM), Automotive Component Manufacturers Association of India (ACMA) and Federation of Automobile Dealers Associations (FADA) said if any of the segment does not commence operations the value chain will not be able to re-start.

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They also said the sector is losing revenue to the tune of 2,300 crore per day and therefore starting of economic activity in the sector is critical.

Also Read : Carmakers suggest steps to reboot auto industry post lockdown in India

"The automotive industry in India, which was already facing a severe downturn for over 15 months, with the lockdown, is now confronted with total disruption of its entire value chain," they said, adding with challenges of working capital across the sector, several of the players in the industry, right from the component suppliers to the dealerships, are faced with the challenge of staying solvent.

Asking the sector to be allowed "to resume operations in complete unison", the three apex chambers representing the entire automotive value chain said "the automotive value chain is highly complex, integrated and interdependent".

"A vehicle manufacturer cannot commence operations if any one of its suppliers is unable to undertakeproduction. Further, production for a vehicle manufacturer would only amount to adding to inventory and thus blocking working capital in case dealers are unable to sell vehicles," the joint representation said.

Also Read : Automakers yet to resume production, wait for supply chain to restart

It further said, "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."

"Considering the fragile health of the automotive industry, as also its economic contribution, we are writing to request you to kindly allow the entire automotive value chain for opening up and re-commencing operations," the joint submission said.

It further said, "This would include the vehicle manufacturers (OEMs), the component suppliers, the dealers, the service workshops, and the regional transport authorities. In fact, auto dealerships / workshops will not be able to open till such time the citizens are not allowed to come out of their homes freely."

Underlining the contribution of the auto sector to India's economy, the three bodies said, "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."

They said the automotive industry in India is a key driver of its economic engine with USD 120 billion in turnover, contributing 7 per cent to India's GDP, 49 per cent to the manufacturing output and creates employment for over 3.7 crore people, directly and indirectly.

"The sector also exports USD 27 billion worth of vehicles and components annually," they added.

First Published Date: 02 May 2020, 12:49 PM IST

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