Indian Automakers Brace For Impact Of China’s Coronavirus On Supplies, Sales

Indian automakers fear that the novel coronavirus outbreak could lead to a shortage of inventory and disruption of supplies.

“Supply chain is getting disrupted globally. Right now, the production is going but if (factories) don’t open in the next few weeks then we could have a shortage,” Rajeev Chaba, managing director of MG Motor, told BloombergQuint. Chaba expects sales to be hit in February after China extended its Lunar New Year holiday. The British brand owned by China’s SAIC Motor Corporation Ltd. is dealing with stretched inventory and advance bookings.

“Some (micro) chips are coming from Europe and goes into various components to China, and we’re importing certain things from China,” Chaba said. “Since everything is closed, it’s going to be an impact for us.”

MG Motor isn’t alone. India’s third-largest automaker, Mahindra and Mahindra Ltd., told Bloomberg that the coronavirus outbreak would hit the production of some vehicles, affecting their transition to newer emission standards, as they import some components from the world’s second-largest economy.

Maruti Suzuki India Ltd. and Hyundai Motor India, too, said that they import some components from China, but don’t foresee any immediate impact.

“We have some tier-2 vendors that source from China, but there’s no impact as such,” Shashank Srivastava, executive director of sales and marketing at India’s largest automaker, said. But according to Puneet Anand, Hyundai India’s group marketing head, “if the issue persists for another one-two months, then there’s reason to worry”.

The Society of Indian Automobile manufacturers is reaching out to all automakers to access the impact of the coronavirus outbreak, a person privy to the development told BloombergQuint. The industry body reached out to other companies after it received feedback from Mahindra & Mahindra about the impact on their business due to coronavirus, the person said.

The city of Wuhan, which is the epicenter of the virus outbreak, comes under the Hubei province which is also one of the nation’s top auto-industry hubs along with Shanghai, Guangzhou and Chanchun. China is also the world’s largest maker of electric vehicles.

Two-wheeler makers are worried, too.

Hero Electric, too, anticipates its supply chain to get affected. “We’ve got batteries sitting at the China port and are unable to ship-out,” Naveen Munjal, managing director of Hero Electric, said. “We have inventory right now, but we’re going to run out of inventory eventually.”

Munjal said that they’re looking for alternatives but that could lead to increase in costs. “If we do localisation that could lead to increase in cost by 10-15 percent, and we will absorb (the costs),” he said. “We’re waiting and watching how things unfold and by next week when the China holiday ends, we will have a better clarity.”