A Grip of Slowdown in the Automobile Industry

Understanding how automobile industry is going through a downfall during corona-virus pandemic

Due to the sudden outbreak of coronavirus in the ‘world’s factory’ to all the other countries, we’ve abruptly taken a step back and entered a constant state of fear and misery. When most of the people are still figuring out a way to prevent and avoid the consequences of the virus, there are industries that have already started suffering and are now facing losses. According to experts, it was already predicted that the recession this year would be bigger than that of 2008 but they failed to predict that it would be so soon. With businesses shutting down and Americans being shut in, it is harder for the economists to foresee the bottom of the upcoming recession and also to know how long will it take to climb back.

There is no doubt on how vulnerable the economy is right now. The impact of the coronavirus pandemic and the lockdown it triggered is clearly evident in financial markets. But the deeper impact that it is having across businesses and industrial sectors has still no clarity. The automobile industry started facing a downfall in 2018 despite of some deep discounts and new model launches. The sale of vehicles across categories slumped tremendously. The auto industry is probably the most cyclical or most dependent on the business cycle so this year because of Covid19, it is the first to go through recession. China is responsible for almost 27% of India’s automative parts of imports. Due to the closure of the factories in China, there has been a delay in the production of vehicles and the delivery of them. The pandemic led to supply chain disruption and the production halt in March 2020. Car manufacturers have warned the public on pre order days, particularly from companies that rely on overseas supplies.

Since advertising is a paid format, almost all the companies have decided to put a stop on their ad spent and cut down on their spendings, but automobile industry has seen a 13% increase in the number of 30 second commercials during the last week of March.
According to a report, the Indian automobile industry is likely to suffer an estimated loss around ₹13,000 crore to ₹15,000 crore. However, the loss can be recovered, once production resumes and the manufacturers are willing to ramp up the production and increase the capacity utilisation.

With no clear sight of endgame and several jobs at stake, it becomes imperative for businesses like automobile to strategise and undertake certain approaches. To deal with unfavorable conditions in the economy, businesses shall invest in programs like Lean Six Sigma that would not only help them to bounce back into the market but also help them to improve their performance and eliminate wastes. By adopting programs like these, companies can benefit with better cash flow, can raise equity and also diversify their line of business.

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