The outbreak of COVID-19 has affected each sector of the economy massively. The demand and supply of every sector whether big or small has deteriorated because of it. The automobile sector has also taken a serious hit. The transaction of the industry from other variants to BS VI has also decreased the confidence of the customers. A Senior Partner at Roland Berger LLC, Wilfried G Aulbur said in a webinar on the impact of COVID-19 that the productions at the levels Q1 and Q2 may be stopped partially and the stabilization in production may take a longer period of time. He said that the stabilisation of production will increase the demand for the auto industry by 2022.
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Looking at the Indian economy, Wilfried Aulbur said that Indian Economy has seen a lot of bad impacts in the financial year 2020. The banks have seen a tremendous drop in the lendings. Non-performing loans (NPAs) in banks and Non-Banking Financial Corporations (NBFCs) both, have shackled the country.
Instability in the prices of fuel has also demotivated the sale of vehicles in the country. A great contraction can be seen in the sales of automobiles from year 2019 to 2020. It was expected that the sales will go up during the end of the financial year 2019 but the outbreak of the virus has crushed the sales beyond recovery. The end month of March saw more than 50% decrease in the sale of automotives because of the outbreak and lockdown announced. Other factors like volatile rural demand, BSVI implementation, weak consumer sentiments, hike in insurance cost and credit shortage from NBFC has worked adversely in reducing the demands even further for the financial year 2020.
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Aulbur also said that more people are relying on the Chinese supply which has made the supply process even more complex now and the present system of integrated supply has taken a hit due to this. The outbreak of coronavirus has created chaos in the US and European Economies, putting more than half of the economic activities on hold. A large number of original equipment manufacturers (OEMs) have closed the production of the parts. The prices of crude oil are at a new low of 17 year being down by 65% since January. The disturbances in the environment, the financial crisis and interrupted supplies have worked like a threefold factor to bring down the demand for automotives. The global impact of the corona outbreak will not let the sale increase till 2022.
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Aulbur said, "While global trade may stabilize earlier, macroeconomic impact of recession may be felt on the supply and demand side for a prolonged time period." The uncertainty in the removal of the virus from the environment will force the investors to reduce the investments. Aulbur said that the companies should be focused on ensuring the safety of their staff as there is not much they can do except wait for the pandemic to be over. He suggested that the companies should undergo the steps to maintain liquidity for some time and should procure the aid from the government.