The coronavirus outbreak in China is taking a toll on many industries in India, ranging from pharma to mobile handsets to auto companies.
Many companies were heavily dependent on supplies from China and there are fears of disruption if the situation does not improve.
Overall, India imports goods worth US$70 billion from China. It also exports products worth $17 billion to China.
Indian drug manufacturers, especially those making antibiotics and vitamins, largely depend on China to source ingredients such as penicillin G – and other products based on it such as amoxicillin and ampicillin – and tetracycline. China is the world leader for producing fermentation-based drug ingredients.
The coronavirus scare has caused uncertainty around this vital supply chain. The Chinese government has also extended the New Year holidays, which were to be from January 25 to February 3, but will now be extended until mid-February.
However, if there is any further extension of the holidays, then Indian drug manufacturers, mostly formulation plants that use Chinese drug ingredients to make tablets and capsules, could get impacted.
Around this period of the year, India drugmakers usually stock up their inventories anticipating the Chinese holidays. But an extension could disrupt their operations.
The fallout could be more severe for smaller units, which generally maintain small inventories. However, a prolonged shutdown in China may even affect larger units.
Industry experts point out that India should now seriously work towards attaining self-reliance in making penicillin G and other critical ingredients to reduce dependence on China. The Indian government should formulate policies that would encourage Indian companies to develop fermentation-based drug ingredients.
China is also a prominent player in chemical-based ingredients that are used to make some cardiovascular drugs and cholesterol medications.
TV, phone prices may rise
Indian smartphone and consumer electronics companies may face production cuts and launch delays as industrial activity in China has been brought to a standstill due to coronavirus outbreak, and this could affect component supplies.
Indian manufacturers use 75% Chinese components for TVs and almost 85% Chinese components for smartphones. Important components such as mobile displays, open cell TV panels, open circuit boards, memory and LED chips are imported from China. Compressors for ACs and motors for washing machines are also sourced from China.
Due to supply shortages caused by factory shutdowns, Chinese vendors have increased prices of key components by 2-3%. This increase could lead to a hike in product prices in India.
Like their pharma peers, Indian smartphone and consumer electronics manufacturers had taken measures to cope with the annual Chinese holidays, but the extension has caught many off-guard.
Xiaomi has assured its India operations would not be affected as the company had already planned a shutdown during the New Year. However, Apple CEO Tim Cook said the smartphone maker was working on a plan to make up for any production loss in China and was looking for alternative suppliers.
The makers of various television brands expressed apprehension that the prices of several components could go up further if the shortage continues and this will force them to put up prices. They also said it was difficult to find an alternative supplier at such short notice.
Auto firms to be hit
The Chinese-owned MG Motors India, which manufactures popular sports utility vehicle MG Hector, has said its production could be affected due to supply disruptions caused by coronavirus outbreak.
The company has pending orders for about 16,000 units of the MG Hector and 2,409 units of electric vehicle MG ZS EV, which was launched in January, but is yet to hit the roads. The batteries for electric vehicles are being sourced from a plant near Shanghai.
MG Motor India produces about 3,000 units of Hector every month at its plant in Halol, Gujarat. The MG Hector was launched in mid-2019 and the response has been overwhelming with a long waiting period.
Tata Motors, whose British unit Jaguar Land Rover has a plant in China, has said it is closely watching the situation.