MUMBAI: “This is worse than the impact of 2011 tsunami in Japan. This time around, factories across the world can potentially come to a standstill because of supply drying out on account of the (novel)
coronavirus,” said Venkatram Mamillapalle, MD of Renault India.
Mamillapalle understands global supply chain better than many, having sourced parts from across the world in his previous stints.
At a time when
manufacturing systems operate on ‘just in time’ principles, the pipeline of parts from China, the biggest manufacturing hub for the world, is fast drying up.
The automotive industry has been working with lean inventory and single market sources for a long time to effectively manage inventory and costs.
“The impact is unavoidable in India, it’s only a matter of time before who gets affected first,” Mamillapalle said, as factories in China have yet to resume work following the virus outbreak.
Manufacturers of
BS-IV emission compliant vehicles will take a hit. If critical components from China do not arrive in time, components sourced locally or from other markets for BS-IV compliant vehicles will be rendered useless, as these cannot be sold or registered beyond March 31 as per a Supreme Court directive.
Already, Mahindra & Mahindra has said it is running out of engine control units for BS-IV vehicles. It has been compelled to stretch production of BS-IV vehicles to March, after originally scheduling to stop this month end.
According to people in the know, Bosch India’s electronic arm has sent a letter to some customers saying it may face an inventory shortage beyond February 15 if factories do not resume production in China from Monday. About 50-80% of electronic components are imported, half of which comes from China.
Ravi Bhatia, president and director at JATO Dynamics India, a global supplier of automotive intelligence, said Chinese exports to India touched $4.5-$5 billion in 2019. A one-month delay would mean loss of supply worth at least $400 million. “The information emerging this weekend out of China indicates high severity... China’s return to production may be delayed. In the long term, this may provide an opportunity for
Make in India as well as diversification of supply chain,” added Bhatia.