How the Indian auto industry could change post COVID-19?
In our last blog, we saw why India was such an attractive destination for foreign companies, especially when moving out of China after the COVID-19 crisis. In case you missed out on that blog, you can check it out here. This week, we will take a look at how the Indian automotive industry could change post the Coronavirus pandemic.
Transformation is in the offing..
Just like every other industry, the automotive industry has also felt the full force of the coronavirus pandemic. The lockdowns have resulted in temporary shutting down of operations of car makers and suppliers alike. The months of March and April saw the automotive industry grinding to halt. As a result, sales have also seen a massive dip and a number of OEMs recorded zero sales in the month of April. All in all, this unforeseen crisis has left the automotive industry reeling and staring at huge losses. The Indian automotive industry has of course been severely hit, too. However, it is not all doom and gloom. In the wake of a number of companies looking to move out of China and diversify their supply chains, there is a chance for the Indian automotive industry to develop and transform itself, especially post COVID-19.
The winds of change have begun to blow..
ET Auto has discussed a few ways in which the Indian automotive industry could change after this crisis is over. A resurgence in personal mobility can be expected owing to better safety in the context of social distancing and flexibility. With safety and reliability in mind, it is also likely that we may see much cleaner public transport, with in-vehicle hygiene and health emergency aids, as well as cleaner bus stops and depots with daily sanitisation. It goes without saying that this crisis has already called for rejigging of the shop floor. The shop floors will likely be made more compact, and most importantly, be redesigned to have minimum contact. Companies such as Maruti Suzuki, Mahindra & Mahindra, Toyota Kirloskar are putting in place various measures such as demarcated work areas on shop floors with plastic screen shields, re-laid assembly lines, automating and digitising various processes, working with 50% capacity and increased number of shifts, sanitising tunnel of disinfectant mist for workers, big trucks and vehicles, PPE for security staff, continuous employee health monitoring, and automated sanitiser dispensers.
The industry has been late in going digital but finally it seems like digital interfaces using enhanced AI and ML will be widely. Brick and mortar dealerships will also likely be slowly replaced by online marketing and sales. A greater focus will also be on local manufacturing of components, modules and technologies in order to be better prepared for such a situation and mitigating the over dependence on any country. More emphasis will be laid on branding than on sales promotions and discounts, and global automakers will work and invest in order to make their brands easier to relate to for the Indian customer. Although the new car sales have gone down, the used car market is already upbeat. It is only natural that customers with employment uncertainties and a hole in their pockets will look to save money and instead opt for more affordable means of personal transport. Used cars provide a good cheap option, which means the second-hand car market is likely to thrive.
The top brass is optimistic..
RC Bhargava, Chairman of Maruti Suzuki, the country’s largest passenger vehicle manufacturer with more than 50% market share in the small car segment, says that the consumer behaviour will change because of the current COVID-19 crisis. According to him, there is a pent-up demand for entry-level affordable hatchbacks in the domestic market. Maruti Suzuki could profit greatly with its attractive and reliable brand and cost factor that it holds for Indian customers and the market. Maruti has been keenly focusing on smaller cars and making the best of compact even as others have shifted focus to bigger cars.
On the other hand, Pawan Goenka, Managing Director & CEO of the utility vehicle manufacturer, Mahindra & Mahindra, feels that SUVs will help maintain better social distancing by allowing three people to travel at a time with one person per row, as compared to only two persons in a passenger car. Rajan Wadhera, President of auto industry’s apex body SIAM, thinks that two and three-wheelers, which contain a large amount of local ancillary parts, are expected to rebound faster. Hero Moto Corp chairman Pawan Munjal is of the opinion that people would continue social distancing and hence, there would be greater preference for owned vehicles including two-wheelers. Honda Motorcyle also echoed this sentiment.
EVs – Upwards and onwards!
The ongoing pandemic is likely to change the way Indians commute. With a significant drop in air pollution levels in many cities due to the lockdown, an opportunity to move towards smart and sustainable mobility presents itself. The consumers are aware of the improvement in the air quality which could positively impact the onset of electric vehicles in the country.
Experts at the ETAuto Virtual Roundtable on ‘Post Covid-19: Future of Electric Vehicles Global and India’ were of the opinion that the Indian EV market will continue to be more or less driven by the two and three wheelers. They also think that the EV market is set to recover quickly from the coronavirus impact as compared to their fuel combustion counterparts. The EV outlook shall remain strong in the medium term.
In their forecast, Frost and Sullivan have also put forward the same view. According to them, e-rickshaws, e-autos and e-two wheelers are the most promising segments for electrification in India and are expected to account for over four-million units by 2025. Jose Serras-Pereira, Director and Head of EV at Frost & Sullivan UK, says that Li-ion production will boom in India. According to him, batteries, power electronics, thermal management and battery management systems will offer significant opportunities to localize and establish a comprehensive supplier ecosystem in India by 2025.
It is, therefore, quite clear that the EV market in India is going to be on the up in the period post COVID-19, as echoed by industry experts.
In our next week’s blog, we will take a look at e-mobility opportunities in India. Check out all our posts by visiting us at www.quanzen.com and feel free to write to us at email@example.com. Your feedback and comments are highly appreciated! Till next time, stay home, stay safe!