Auto Industry Facing Lockdown Loss - Rs.1K-12K crores per day

As we continue to be in the nationwide 21 days lockdown to contain the spread of the COVID-19 pandemic (Coronavirus Outbreak), many of the businesses have shut down their operations apart from businesses listed as essential services. With this various industries along with many businesses have been affected. Especially the automobile industry, as it is facing a loss of Rs.1000 crore to Rs.1200 crores per day. 

Taking a thorough look at this situation, the President of ACMA (Automotive Component Manufacturers Association), Deepak Jain has said that, “The Auto Component industry stands by the Government of India in this hour of challenge. However, with complete stoppage of production in the vehicle industry and scarcity of working capital, the situation in the component manufacturing units, including the tier-2s and tier-3s has become quite acute, threatening their survival. We have requested the government for helping us with immediate relaxation of borrowing norms and statutory payments, extension of moratorium on payment of principal and interest of loans for a year, among others. We are also seeking support of SIAM and the OEMs to ensure minimal disruption of the supply chain.”

ACMA request to Government

In the Indian market, the automotive industry was already dealing with a lot of pressure owing to the decline in sales and the recent transition from BS-IV emission norms to BS-VI emission norms. With the COVID-19 pandemic the situation has become threatening. The situation with small and medium firms who contribute to the automotive industry will be the worse hit.

Hence ACMA has stepped forward and has requested the government with the following:

• Relaxation on borrowing norms and statutory payment which will help to support the working capital.

• To ease up the norms for NPA recognition by postponing or extending the payment of principal and interest by a year.

• Relaxation in the fixed electricity charges and to levy demurrage charges by seven days on import cargo clearance.

Automotive component manufacturers who have their facility in Tier 2 and Tier 3 cities are facing major issues regarding cash flow. If these issues are not considered and addressed quickly there will be many facilities shutting their doors down. In addition to this, as there is no clarity how the market will be worked about in the coming months, there is a constant fear in the industry. 

Precautions

ACMA has advised all the members to maintain proper safety measures along with security for not only permanent employees but also contractual employees as well. In addition to this, they have ensured that no layoffs take pace and salaries are paid for the month of March. Around one lakh contract based employees have been paid for the month of March in advance. Many component manufacturers have also promised to extend full medical aid to all employees if they or their families contract the Novel Coronavirus. In addition to this, many manufacturers have started running community kitchens to ensure that the contract based employees get regular food.

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