Auto manufacturers reopening, but several factors resulting much lower output

The top automobile companies in India are resuming their production after a hiatus because of the surging cases of Covid-19 and the rampaging second wave of the pandemic. However, there are concerns that the automakers will not be able to reach the optimum production level in the near few weeks, as the demands for the vehicles are much lower because of the Covid-19 pandemic impact.

Automobile manufacturers such as Maruti Suzuki, Hero MotoCorp, Honda Motorcycle & Scooters, Mahindra & Mahindra etc have already resumed their production over the past week. However, not all of their factories are operational. The current production of many automobile OEMs is less than 50% of production capacity.

Despite the partial resumption of vehicle productions across the factories, output remains weak. There are multiple factors that are playing key roles in this abysmal situation.

Several automobile manufacturers are running production in single shifts and producing vehicle at less than 50% of their usual output capacity.
Several automobile manufacturers are running production in single shifts and producing vehicle at less than 50% of their usual output capacity.

Dealers impacted by lockdowns

Several state governments have announced and continuing the lockdowns and travel restrictions. Due to this, a very large number of automobile dealers across the country are shut for quite some time, resulting in no sales or very low sales of vehicles.


Dampened consumer sentiment

Consumers are wary of the pandemic's second wave that is still continuing and the upcoming third wave as well. As healthcare too is going through a crisis situation, the potential and aspiring vehicle buyers are not very keen to spend the large sum of money for such a big-ticket purchase like a car or a motorcycle. Instead, they are keeping the money for a possible medical cause. This dampened sentiment of the consumers is impacting the vehicle sales and subsequently the vehicle production as well.


Low disposable income

While the first wave of pandemic devastated the already ailing Indian economy last year, a chunk of the consumers was showing resilience after the last year's lockdown was being withdrawn step by step through the unlock phases. However, post the festive period, especially since early 2021, as the second wave of the pandemic hit the country harder, the revival pace of economic crisis went downward again.

Many people lost their jobs, while many people who lost jobs last year are still looking for jobs. Apart from that, huge healthcare expenses are also resulting in people losing their disposable incomes significantly. Such a situation is also playing a key role in the low automobile demand and low output.


Few shifts in factories

Due to the lockdown, travel restriction, lack of manpower, strict safety protocols and other adverse situation caused by the second wave of the Covid-19 pandemic, the automakers are not being able to run their factories at full capacity. Instead many of them are opting for a single shift for production, which is resulting in lower production output.

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Supply chain issue

Several auto parts manufacturers are hard hit by the Covid-19's second wave, due to similar reasons as their OEM partners. These are resulting in lower production output for the critical auto components that are eventually impacting automobile production as well.

First Published Date: 25 May 2021, 10:27 AM IST
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