Maruti-Suzuki Swift cars roll off the assembly line at a plant in Manesar in India's Haryana state. Photo: AFP

The 21-day lockdown announced by Indian Prime Minister Narendra Modi on Tuesday night and the earlier lockdowns announced by various states to contain the spread of coronavirus are expected to take a heavy toll on the country’s automotive sector.

The Society of Indian Automobile Manufacturers has estimated that the industry will suffer a daily production loss of 23 billion rupees (US$ 303 million) due to the shutdown and the 21-day curfew would thus result in a loss of around 500 billion rupees ($6.6 billion).

Mercedes Benz and Ford India closed their factories last week and most other automakers suspended production on Monday. Carmakers Maruti Suzuki, Hyundai, Honda, Mahindra, Toyota Kirloskar Motor, Tata Motors, Kia Motors and MG Motor India have announced temporary plant shutdowns.

Two-wheeler makers such as Hero MotoCorp, Honda Motorcycle and Scooter India, TVS, Bajaj Auto, Yamaha and Suzuki Motorcycle have also suspended production.

They had initially planned to suspend operations till March 31, but the prime minister’s national lockdown announcement means they will remain shut till at least April 14.

Auto sector executives claim the costs may be higher than the industry body’s estimate. They feel that even if production resumes in mid-April, the demand will be tepid as customers will stay away from showrooms. They also pointed out that China took three months to bring the virus under control and hence they fear the current lockdown may be extended.

The lockdown has been welcomed by industry leaders as a necessary step to combat the spread of the deadly pandemic. Pawan Munjal, the chairman of Hero MotoCorp, India’s largest two-wheeler company, said he wholeheartedly supports the decision.

The number of confirmed Covid-19 cases has now crossed 600, and medical experts fear the rate of increase will become much faster. They fear India is more vulnerable due to its population density, which makes social distancing a challenge. The average number of residents per square kilometer in India is 465, which is more than three times that of China (145).

Unsold inventory

Due to frequent lockdowns, automakers are finding it difficult to meet the forthcoming Supreme Court deadline on the sale of Bharat Stage IV emission vehicles as the country moves towards a more stringent Bharat Stage VI norms. These emission standards are instituted by the government to regulate the output of air pollutants from motor vehicles.

Last October, the Supreme Court decreed that no Bharat Stage IV vehicle can be sold in the country from April 1. But automobile dealers are currently saddled with BS-IV vehicle stocks worth around 62 billion rupees. This includes about 700,000 two-wheelers valued at 38 billion rupees, 15,000 passenger vehicles worth 10 billion rupees and 12,000 commercial vehicles worth 14 billion rupees, Livemint reported.

The Federation of Automobile Dealers Associations of India and Hero MotoCorp had filed separate interlocutory applications with the Supreme Court seeking relief as the pandemic has aggravated the earlier slowdown. The court is likely to hear both pleas on 27 March.

India’s $120-billion automobile industry accounts for 7.5% of the country’s GDP, about 49% of the manufacturing GDP and 15% of the GST collections. It employs more than 30 million people directly and indirectly.