Shares of TVS Motor Company slipped 6 per cent to Rs 410 on the BSE on Tuesday after the two and three-wheelers manufacturer said the outbreak of pandemic Coronavirus (COVID-19) in China will lead to 10 per cent drop in its planned production in February. The stock was trading at its lowest level since October 17, 2019.
In the past one month, TVS Motor has underperformed the market by falling 12 per cent, as compared to 3 per cent decline in the S&P BSE Sensex.
"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," TVS Motor said in an exchange filing post market hours yesterday. READ THE COMPANY'S STATEMENT HERE
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, the company said.
Commenting on the development, the company's Director & CEO KN Radhakrishnan said, "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.”
According to a 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 rating agency said.
At 9:40 am, the stock was trading 5.6 per cent lower at Rs 413. In comparison, the benchmark S&P BSE Sensex was flat. Almost 19 lakh shares so far have changed hands on the BSE and NSE combined.