Coronavirus impact | Automobile industry’s launch timetable could go for a toss

The coronavirus crisis could hit product development timetables of automobile companies, forcing some of them to relook at projects especially after the expected impact on world economies.

Vehicle development work has a gestation period of around three years for novel products including new platform, about 18 months for a mid-life upgrade and about a year for a facelift.

Not only will companies be inclined to conserve cash to keep the working capital going, they will look to reset the product launch clock to a phase when some demand recovery is guaranteed, according to some carmakers and parts suppliers Moneycontrol spoke to.

While Maruti Suzuki and Kia Motors will have at least two launches each this year, Hyundai will have three. Renault is slated to have two launches as well.

Tata Motors too would be having around three launches while Mahindra would have at least two launches before the end of this year. All these include new models and facelifts.

Next year there are launches planned by VW, Citroen, Great Wall Motors and many other by existing manufacturers.

The impact

Certain work, such as product design and styling that are done using softwares, could continue, but other aspects such as coordination with other in-house departments or vehicle testing is possible only when the lockdown is lifted. The government had asked companies to adopt work-from-home before the lockdown began.

Rajeev Chaba, president and managing director, MG Motor India said, “One thing is clear that it’s not only product infrastructure but travel also is essentially required. One thing is clear. It’s not only product infrastructure but travel also is essentially required. Product experts training for on-ground support, testing of cars, trial build, validation, parts testing and training -- all these happen at various stages before the product launch. The current disruption will certainly delay the launch of new products”.

Chaba was giving an industry perspective about the impact of the pandemic on automobile launches. MG Motor itself has lined up two launches, Gloster and six-seater Hector, before Diwali. All vehicles manufactured in India need to get homologation certificate from the testing agencies before commencing sales.

“We are on time for the launch but we need to see the time required for validation and that is something we don’t want to compromise on in India. This vehicle has achieved validation in other parts of the world but a local validation is required. Right now we are still holding the Diwali launch,” added Chaba.

A supplier who makes insulation material for carmakers said that for projects  running in advanced stages - such as vehicle testing - the current disruption will have negligible impact. But those still in early stages, such as design and styling phase or secondary stage where the suppliers get involved, will be pushed back.

“If we don’t get (component) designs from the manufacturer then we cannot provide any business to the Tier 2 suppliers who in turn coordinate with the Tier 3 suppliers sometimes. Video conferencing cannot replace physical validation of the product and get new business for us. During development stage we have clients come to us every week for evaluation,” said the supplier.

On an average, India gets 10-12 new models from non-luxury car makers and many more upgrades and facelifts every year. Work on many of these products started 2-3 years ago.

“Fixed costs are eating into the company’s savings and short-term viability is getting challenged. Many component manufacturers won’t have capital for new product development and testing even if new projects come by,” said a Pune-based component manufacturer who supplies to carmakers.

With development costs hitting more than Rs 2,000 crore for a new product including cost of new engines, companies with unhealthy balance sheets will be forced to review projects, said a senior executive of a Delhi-based carmaker.

“The shutdown is enforced not just in India but across the world. This means that the financial health of all the global brands will get impacted. Thus every project will be reviewed again. One can cut costs only to a certain level, (but) beyond that it is impossible. The 21-day shutdown will end up punching a hole of more than Rs 50,000 crore in India. Even after the lockdown is lifted it will be some time before foreign travel and foreigners travelling to India resume,” said the executive.