Auto, Consumer Goods Firms Offer Help To Cushion Supply Chain From Virus Pain
As economic activity in India collapsed after the nation’s punishing curbs to contain the pandemic, makers of consumer goods and automobiles stepped up to protect supply chains. From offering payments in advance and faster clearance of dues to health cover to stop workers from leaving, they tried to cushion vendors and distributors.
Keeping supply chains alive is crucial for a recovery after the lockdown decimated demand. More so when slowing consumption threatened survival of distributors of soaps to staples and auto dealers even before Covid-19. The virus worsened the situation, squeezing supply chain credit.
“Vendors were struggling with people leaving, so we supported them by ensuring timely payment so that they can retain their people,” Steffen Knapp, director of Volkswagen Passenger Cars India, told BloombergQuint over the phone. “We are also providing liquidity by paying out much faster than before.”
For the auto sector, the virus came as it grappled with the worst slowdown in two decades. April was a complete washout as not even a single vehicle was sold. And there was an inventory pile-up as India transitioned to stricter Bharat Stage VI emission standards. Even June hasn’t seen retail sales pick up much.
Maruti Suzuki India Ltd., India’s largest carmaker, provided help worth Rs 1,200 crore in interest support, incentives and a reserve fund to assist dealers, according to Shashank Srivastava, executive director of sales and marketing at India’s largest carmaker. “We looked at their cash flow and extended as much support as possible.”
Eicher Motors Ltd., the maker of Royal Enfield motorcycles, cleared its dealers’ dues and helped pay salaries for some of their employees.
Royal Enfield recently held a town hall with dealers and suppliers from around the world to understand their problems. Vinod Dasari, chief executive officer, told BloombergQuint, “Auto industry is like an ecosystem and if you don’t take care of the people in the entire spectrum, then this isn’t a sustainable model.”
While consumer goods were designated as essential service during the lockdown, supply chain disruptions and manpower shortage persist. Vendors and distributors, mostly medium and small businesses, face liquidity crunch.
Nestle India Ltd. procured milk from 1 lakh dairy farmers and ensured timely payments to vendors during the lockdown, Suresh Narayanan, managing director of the company recently told BloombergQuint in an interview. The Indian arm of the world’s largest food company also placed advance orders with some of its vendors and has provided insurance to supply-chain workers, including unloaders.
Marico Ltd., the maker of Parachute hair oil, and ITC Ltd. also provided insurance to ground workers, it said. Asian Paints Ltd. said it transferred Rs 40 crore to its 52,000 contractors during the lockdown.