Impact Of Corona virus On Luxury Automobiles Industry
Written by Faraz MJ April 24, 2021
The terrible cloud of Covid is step by step swallowing the entire world. It is affecting the different economies of the world. The dispersal of the infection is sufficiently speedy to spread its tentacles everywhere in the world. It is negatively impacting all the attributes of society. Areas like travel and the travel industry, insurance, customer products, and the auto industry are especially absorbing the shocks of the coronavirus.
Statistics show that a reduction of 15% in vehicle deals has happened since the previous year. The deals have seen the steepest decrease since the previous decade. The vehicle deals assume a drop of 40% in the future also.
The production of automobiles requires a tremendous supply chain. Because of this factor, India saw an increase in its yearly production from 3 million to 4 million in Seven years. However, researches showed that it would require at least 5 years to reach the 5 lakh mark. However, carmakers are introducing inventive methods to stay positive and deflect the hurtful impacts of the Covid. Let us see the perspectives of several luxury automobile leaders.
A high-ranking representative of the German carmaker Mercedes-Benz India said that the current market circumstance proffers them an idea to innovate their buyer offerings. He said that the current shocking market condition is a test, even for the worldwide supply chain.
Their sourcing requirements, and also the import conditions, would depend on the circumstances in other countries like Europe, the US, and China. Remaining positive, he also said that they would not drop any of their planned investments and initiatives. Instead, they would take creative approaches to manage this issue. They would arouse client interest and hence augment their demands.
With the sales of 2.386 units in quarter 1 of 2020, Martin Schwenk, MD, and CEO of Mercedes-Benz said that the sales would decrease more extreme later on. But, they are trying to help up the deals and reduce their losses. Researchers even tell that the sales of automobiles would display a "U-shaped" curve in such a circumstance.
Another perspective put out by Balbir Singh Dhillon, head of Audi India states something very similar. He says that the purchasers have stopped their vehicle purchases. This is because these businessmen are first focusing on bringing their organizations back on track. So a ray of hope for the luxury automobiles industry is possible just in 2021. Dhillon even expected regularity to return in the care sector if a successful vaccine is developed.
Importance of Unity!
These difficult times have developed the importance of unity. To improve their organizations, the automakers' have inclined towards the emerging mobility opportunities. They are indulging in tricky partnerships and organizations. Such methods are a competitive advantage in these edgy times.
The requirement for creating partnerships and organizations has increased. This is because the mobility options require autonomous and electrical vehicles. Such choices require a large investment, going in billions of dollars. Hence, to battle the adverse financial impacts of the infection and to confront the serious financial crunch, the development of alliances is supported.
The worldwide automakers met the deficiency of funds by guaranteeing liquidity. Examples of cash secured by many global automakers are as follows:
- Ford amassed 8 billion dollars from unsecured bonds as well as US dollar 15 billion from existing credit lines.
- Daimler also secured US dollar 13 billion credit from the banks.
- Volkswagen has calculated a loss of US dollar 2.2 billion every week because of the lockdowns and factory closings.
- To give support to the automakers, the French government has proffered US dollar 8 billion to Renault and PSA.
The Automobile industry is considered the economy's Barometer. The Covid is representing an unfavourable and breaking impact on this area too. This is because vehicles are not an important thing for families in India. They are optional buys and are crucial only for service providers or shared mobility services.
The difficult times have shown heart-throbbing data for the vehicle industry. In the financial year 2020-2021, the regression model has assumed vehicle sales of 20.43 lakhs. Because of the initiation of the virus from China, the US and Europe will redirect from China. Hence, the Indian vehicle industry needs to clasp onto this brilliant chance.
Variations in Supply
There has been a disruption in the supply of stock needed for the production of automobiles in India. This is because India's auto part imports owe 27% to China.
Moreover, many companies of automobile producers like Robert Bosch GmbH, ZF Friedrichshafen, and Valeo have seen a closure because of the worldwide lockdowns. These companies are edged in the Hubei region. Accordingly, they have enforced a postponement in the production of vehicles like Bharat Stage Four (BS-IV).
But now, during the post lockdown period, the demand has resurfaced slowly. People suppose indications of a "V-shaped" recovery in sales of automobiles.
Variations in Demand
Let us flip the coin and examine the auto industry from a demand perspective.
A report which was delivered by Fitch solutions shows the data related to the demand of the vehicle industry. This information said that vehicle production in India is probably going to cut by 8.3% in 2020. However, a determined rate of 13.2% was expected as in 2019.
The devastating impact of COVID-19 displayed a sharp decrease in the OEM wholesales also in March 2020. The last 50% of March 2020 saw breaks in the supply chain, and hence a production pause was sighted.
However, OEMs like MSIL, Hyundai, and Toyota have excelled against their peers, because of an early shift to BSVI and low BSIV stock. 77 thousand units of MSIL had been sold in the market, but the deals truncated at a rate of 48%. The deals of Toyota had also declined by 45%. Then again, the deals of Hyundai had also cut at a rate of 41%.
The planned BSVI change in the 2nd half of March and April severely affected the MHCV deals too.
Regrowth of the industry!
- Mahindra started the production of automobiles at its engine factories in Igatpuri and Haridwar. The production began on May 15. Social distancing standards and sanitization is followed and executed.
- With its re-entry into the market, Nissan had resumed dealerships in green and orange zones across the nation from 11th May. The company integrated itself with a small staff to continue the processes of the marketing and sales agency in Gurugram as well. The industry is resuming its services by following the local government guidelines in mind.
- Ford India had initiated one of the most useful features during the crisis. This company had launched Dial-A-Ford service from 5th May. It promotes booking test drives or booking a car and getting it delivered. This service also offers car service and other basic car problems facilities to the buyers. Not only this, but the carmaker also focuses on governmental guidelines and safety standards. The people are following the sanitization methods and the social distancing standards as well.
- Bajaj Auto had also dipped its foot in the market by launching its production with a single work shift. Its activities had started at the Chakan factory near Pune From 5th May.
- Toyota Kirloskar Motor had also re-start their previous works from 5th May at Bidadi factory, near Bangalore.
- The Renault Nissan Alliance had adhered to the norms of the local government. Hence it had resumed its services in Oragadam, Chennai limited to specific restrictions.
- Rolls Royce was the 1st car maker to resume its services in Britain after the lockdown. It had first declared to resume the production of automobiles at the Goodwood factory from 4th May.
Tips and tricks!
Covid has posed numerous hurtful consequences for the auto industry. However, it has also built a few chances for this industry.
Because of health and security concerns and diseases, the use of personal vehicles is assumed to increase. There are equivalent chances of growth in shared mobility because of the huge size of the industry.
The dispersal of the Covid was started from China. Hence, the economies of the world have lost their trust in China. Then again, China had been one of the premier homes for the automotive supply chain. Presently the worldwide organizations would pay special mind to alternate sourcing channels. They are not likely to invest in China.
This is an entirely productive chance that ought to be held by the Indian Carmakers. Also, the clients of the US and Europe proffer significant net revenues. It is estimated that a 2% growth in the rate of the worldwide industry would lead to a dollar 10 billion in incomes. However, to get this chance, production factories and supply lines need to guarantee high levels of standardization and tidiness. They should manufacture products and services consistently.
The Covid has hurt the luxury car industry. Indeed, even the tremendous and powerful car-producing businesses have either stopped their tasks or reduced their exercises. Because of the worldwide lockdowns and the social distancing standard, the showrooms are devoid of customers. These as well as the car-producing factories are being closed down to turn away the total variable costs. A few plants have altogether suspended their activities to reduce the total fixed expenses as well.
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