TVS Motor has said that the outbreak of pandemic Coronavirus (COVID-19) in China will lead to 10 per cent drop in the planned production in February.
"Coronavirus has led to impact on supply of certain components for production of BS-VI vehicles. China is a key part of the global automobile supply chain," said TVS Motor.
Earlier, the country's largest two-wheeler maker Hero MotoCorp also said that company's production will hit by around 10 per cent during the month of February.
While the company’s direct dependency on China is limited for components, some Tier II suppliers have been impacted adversely which will lead to 10 per cent drop in the planned production in February 2020. All efforts are on to normalise this at the earliest, said the company.
KN Radhakrishnan, Director & CEO, TVS Motor Company, said, "At TVS Motor Company, we have completely transitioned to BS-VI in the month of January 2020. To minimise the impact on production of BS-VI vehicles, we are consistently monitoring developments with those of our suppliers who are sourcing certain components from China. Parallelly, we are also exploring suppliers in other regions and are looking to localise within India. As a customer-centric organisation, our endeavour is to ensure that the impact on our customers and operations is minimal.”
The coronavirus outbreak in China has lead to production hit to some automakers, while other said they have cushion for a month. If the factories are not opened in the next one month, then it will be a real challenge, they said. On a positive note, the China issue could support the margins of battery and tyre firms like Apollo Tyres, on account of the potential decline in global commodity prices.
According to Crisil estimate, around 18 per cent of automobile component imports and nearly 30 per cent of tyre imports come from China. Automotive Component Manufacturers Association of India (ACMA) says India imported around $ 4.2 billion of auto components in 2019 from China.
Companies have stocked up inventories in anticipation of the Chinese New Year. Hence, the virus outbreak is expected to cause limited disruption in the fourth quarter of fiscal 2020, as Indian auto original equipment manufacturers (OEMs) tend to have import inventories for 30-60 days.
But lack of even a single critical component such as printed circuit boards can hurt an OEM’s ability to manufacture vehicles. The current slowdown and adequate stock of Bharat Stage (BS)-IV vehicles serves as a relief for domestic OEMs albeit production of BSVI vehicles, to be sold effective April 1, 2020, could get disrupted if lockdown in China persists, says a Crisil analyst.
Vinnie Mehta, director general, ACMA earlier said that at present the situation will not impact OEMS, but if the trend continues for the next 3 weeks or one month then the impact will be felt.