Impact of the Coronavirus Pandemic and Lockdown on the Indian Automobiles sector

 

Covid-19 has severely impacted several industries in the Indian economy. Companies had to incur huge losses due to which they were shut down and lakhs of people lost their jobs in an instant. One majorly hit sector was the Indian automobile sector. 

The Indian Automobiles Sector had incurred massive losses during the pandemic. A steep decline in customer demand was observed and a huge number of jobs were lost during the lock-down.  Lots of Original Equipment Manufacturers (OEMs), which provide equipment for the construction of automobiles, had cut down their original equipment production by 20 percent. The government also imposed a regulation wherein they made it compulsory for auto car manufacturers to control gas emissions by manufacturing and selling only BS 6 vehicles in the market from April 2020 which costs more than the previous BS 4 vehicles. All this led to a 2% hike in car prices within a month or two after the lock-down, which further decreased the demand.

 

Furthermore, a total of around 300 auto dealers had to shut down their business due to lack of demand and irregular cash flow. This led to a catastrophic scenario of 3.45 lakh job losses.

An estimate was released during the month of December 2020 which stated that the sector suffered an average loss of 2300 crore rupees daily after the lock-down was imposed.

Demand for passenger vehicles in India also suffered a mammoth loss of 70 % during the April-June period. During that period, people were acting cautiously due to Covid-19, they traveled only when necessary and they preferred personal vehicle over passenger vehicle.

 

After such a rare catastrophe on the automobile industry due to COVID 19, the sector is expected to be on its way towards recovery in 2021 from the damages it had incurred during the year 2020. Companies like Hyundai, Honda, and Toyota have shown significant improvements in their Q4 results in 2020.  They had released press statements during the end of the year 2020 in which they stated that they learned a lot from the struggle during the COVID 19 pandemic as it had taught them a lesson of endurance and struggle wherein they learned about new aspects of customer behavior.

With people switching more from public vehicles to personal vehicle, the above statements seem to hold some weight in the future. Delhi Government, along with many other state governments in the country, is planning to make its state more reliable on electric energy for transport rather than fuel like petrol or diesel. Delhi plans to make a third of the state's total number of vehicles electric by the year 2025. With such great plans for the future, the automobiles sector of the Indian economy is expected to recover back to its pre-Covid level of growth by 2022.