Increase in localised lockdowns may have adverse impact on demand: RC Bhargava

While there has not been any significant impact yet on demand for passenger vehicles in the local market, if the spate of localized curfews/lockdowns spread across the country, it would have an adverse effect on the automotive industry, said RC Bhargava, Chairman at the country’s largest car maker

Bhargava told ET, “So far, nothing (read no impact) which will make a real difference (on demand for passenger vehicles). If it (localized curfews/ lockdowns) continues and spreads to other states, then there will be an impact.”

Bhargava informed it is a positive that so far state administrations have allowed industrial units to operate while imposing restrictions to contain the pandemic, however, retail sales of vehicles is getting impacted. “If production is allowed but retail is not allowed, production will come to a stop after some time”, he added.

Several dealers ET spoke to, in fact, confirmed retail sales of automobile this month will decline sequentially over March 2021.

Passenger vehicle sales scripted a rapid recovery driven by pent-up demand and increased consumer preference for personal mobility amid the pandemic, since the easing of the nationwide lockdown last year. Sales of passenger vehicles declined by around 2% to 2.71 million units in FY21. Automakers in India report wholesale dispatches from factories and not retail sales to customers.

Retail sales of passenger vehicles though are expected get impacted adversely in the short term due to the surge in cases and the fresh restrictions being imposed by local administrations to check the spread of the pandemic. However, since inventory in the passenger vehicle segment is low and there is a huge waiting period on vehicles, there is unlikely to be any significant impact on industry volumes immediately. Inventory in the passenger vehicle segment stands between 10-15 days, compared to industry norm of 3-4 weeks.

Several states including Maharashtra, Madhya Pradesh, Chhattisgarh, Delhi, Rajasthan have announced a slew of restrictions the past few days to check the spread of the coronavirus pandemic. These markets account for nearly a quarter of all automobiles sold in the country.

The state government in Maharashtra and Delhi have also directed that all shops, except those providing essential goods and services, remain shut till April 30 and April 26, respectively.

There has not been any disruption in the supply chain though so far on account of the restrictions imposed in states such as Maharashtra, said Bhargava. Production too at the company’s manufacturing facilities in Haryana has not been hampered yet due to rise in number of Covid-19 cases, he said.

India reported 273,810 Covid-19 cases Monday – the highest single-day spike since the pandemic broke out according to MoHFW.

Bhargava added instead of blanket curfews and localized lockdowns the government should rigorously enforce Covid appropriate behavior through mandatory use of masks, ban on congregations and implementation of social distancing norms in public places to check the spread of the infection.