WHERE IS THE IMPACT TO THE MOBILITY INDUSTRY IN THE INDIA?

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Background
As of today, globally COVID-19 cases have exceeded over 750,000 and
States reporting COVID 19 are increasing on daily basis
0 100 With uncertainties, most countries have forced restrictions that would
50 150 impact the economic activities for a longer period of time

The world economy will go into recession this year with a predicted loss
of trillions of dollars of global income due to the coronavirus pandemic
as predicted by UN Trade body

India still shows hope in terms of the spread of the infections and
reporting a lower number of deaths, remains one of the least impacted
among the highly populous countries at present; there are just about
0.39 cases per million people

Government’s decision to lock down the entire country closing

businesses, limiting the movement of people for a period of 21 days

However this move is may be risky for the pace of economic growth of
the country as this will slow down the business operations and paralyses
economic activity for a substantial period
As of 28 March, 05:45 PM India's number of Coronavirus cases increasing rapidly, with 1,500+ cases
according to the MoHFW, a total of
909 COVID-19 cases (862 Indians
at present, there are apprehensions of extension to the lockdown period
and 47 foreign nationals) have that could further break the manufacturing activity across all sectors
been reported in 27
states/union territories
Source: Ministry of Health and Family welfare, updated as on 28th March 2020
 Vehicle sales in India is witnessing sharp drop
Currently India's economy is facing a slowdown and on top CONVID-19 had hard impact on domestic sales; expected
that Automobile Industry recovery will start by year 2022
Impact on Vehicle sales India, FY’15 to FY’20

Units, million
Units, million

TWO WHEELER INDUSTRY MoM Sales (Units) PASSENGER VEHICLE INDUSTRY 3.38 MoM Sales (Units)
(YoY Sales) (YoY Sales) 3.29
21.18
20.19 Mar-19 Mar-20 Impact 3.05 Mar-19 Mar-20 Impact
17.59 17.40
16.00 16.46 14,40,663 8,48,709 41% 2.79 291,806 140,566 52%
2.60
• Production standstill from 18th 2.77 • Production standstill from 18th
• BS VI Transition and COVID-19 impact March onwards • BS VI Transition and COVID-19 impact March onwards
• Sales declined by 22% when compared with • Sales declined by 41% when • Sales declined by 18% when compared • Sales declined by 52% when
previous year compared with March 2019 with previous year compared with March 2019

FY'15 FY'16 FY'17 FY'18 FY'19 FY'20 FY'15 FY'16 FY'17 FY'18 FY'19 FY'20
Units, million

Units, million
THREE WHEELER INDUSTRY MoM Sales (Units) COMMERCIAL VEHICLE INDUSTRY MoM Sales (Units)
(YoY Sales) 0.65 (YoY Sales)
0.70 Mar-19 Mar-20 Impact Mar-19 Mar-20 Impact
0.64 1.01
0.53 0.54 0.86 109,030 11,857 89%
0.51 66,280 41,000 38% 0.69 0.71 0.72
0.61
• Production standstill from 18th
• COVID-19 impact • Production standstill from 18th
• Sales declined by 8% when compared with • BS VI Transition and COVID-19 impact March onwards
March onwards • Sales declined by 29% when compared • Sales declined by 89% when
previous year • Sales declined by 38% when with previous year compared with March 2019
compared with March 2019

FY'15 FY'16 FY'17 FY'18 FY'19 FY'20 FY'15 FY'16 FY'17 FY'18 FY'19 FY'20

• The current decline of the automotive industry can be credited to various factors
› Weakened consumer demand - drop in private investment and a banking crisis, made it hard to access credit
› Increasing vehicle prices due to BS VI Emission norms, several manufacturers have discontinued diesel engines
› Too many back to back changes in industry
› CONVID-19; after lockdown period, vehicle buying will be last priority as many business houses will be impacted during lockdown period and there
may be pay cuts in Industry
Pessimistic scenario: 12 weeks of quarantine The base year is FY’20 (Financial Year April to March) Source: Frost & Sullivan analysis, SIAM

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COVID-19 - Short term impact
Industry experts are confident that an improvement in the situation would bring much relief to the industry in either
May or June as it would take a while for consumer confidence to return to normal

Automotive Industry in India

• Segment Contribution to GDP : Automobiles 7.1%, Auto components 2.3%
• Employment : About 38 – 40 Mn
• Total Automotive Industry : US $104 Bn (₹ 7,825 Bn)
• Auto Component Industry : US $57 Bn (₹ 4,288 Bn)
• FDI Equity inflow : 5.2% (Year 2000 – 2019)

COVID-19 impact on Automobile sector

• OEMs took the decision to shut down production at their units since mid-March
• Estimated production loss of 800,000 to 10,00,000 units in the month of March alone
• In terms of revenue, losses will be tune of US $2 Bn (₹ 150 Bn) per day
• During lock down period, companies won't generate revenue; but a level of fixed expense will be
incurred and will drain the P&L for everyone in the industry
• OEMs could be forced to reduce the BS VI vehicle prices to boost demand
Source: Frost & Sullivan analysis

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 Challenges faced by the Mobility industry in the India due to Covid-19
Economic uncertainty to push consumers to limit mobility and defer purchase decisions WRT vehicle purchase

Auto Components Industry Supply Chain Constraints Shared Mobility Dealer Partners Emerging Segment –EV’s
• Production loss of US $0.13 • Wuhan – large export hub for • Office commute forms the • Dealers are in a crisis due to • Currently EVs cater to a
billion (₹ 10 billion) per day auto components, impacted the biggest business chunk for the lockdown and unsold BS-IV smaller audience; impact is
due to the lockdown supply chains of auto companies Uber and Ola inventory negligible when compare to
• Tier-II and Tier-III are facing in India • Shared Mobility (Ola/ Uber) • US $0.13 billion (₹ 60 billion) fossil-fuel segment
severe hardship on the cash • About 27% of the key parts and business has been dropped by inventory is lying with • Players in EV segment have
flow front accessories are being imported 40 - 50% dealerships already achieved localisation
• Continuing margin pressures, from China – Higher dependency • Post COVID lockdown and • 2W dealerships will be worst up to 85%, electronic parts
any supply-side shocks could of Indian OEMs and Component recovery , shared mobility may impacted due to sizable BS-IV are being still imported
further worry for part suppliers drop for further few months; vehicle inventory holdings • Battery cells are not
suppliers • No demand for Auto parts in the consumers will feel conscious
› 2 Wheeler: 0.7 Mn units manufactured in India
aftermarket for about a month › Passenger Vehicle: 15,000 units • EV players imports them
about hygiene › Commercial Vehicle: 12,000
and half from China, Japan and South
units Korea
• To minimise the financial crisis • Both passive parts, critical
10 - 12% due to lockdown, vehicle
Subdued vehicle demand for raw materials for cells and
8 - 10% manufacturers will support motors are imported
entire year and production loss 50 - 55% dealer partners
Feb. 2020, production loss due
due to CONVID-19 March-April 2020
to dependency on imported parts

Source: Frost & Sullivan analysis 5

Way forward for OEMs
Domestic Automobile demand is expected to be impacted for a prolonged period; consumers will cut discretionary
spending

From
From
Customer • Several OEMs announced extension of • Dealer partners seeking timeline
Customer extensions for BS-IV stock clearance
service in warranty period by 2 months
and
and Dealer
Dealer for customers • Extension to be provided till 30 days
Partners
Partners by Supreme Court for unsold BS-IV
stock
point
point of
of • It permitted retailers to sell 10% of
view
view unsold Bharat Stage-IV vehicle
inventory within 10 days of the
current lockdown which may not be
sufficient time
• OEMs should buy-back BS-IV stock
from Dealer partners else it would
be further financial burden on
Dealers
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 Government authorities, Association and bodies
Opportunity and Measures

Measures

Support for Auto Industry

Increase in infrastructure spends – need massive push to create robust infrastructure;

• The recent outbreak of coronavirus steady power supplies, efficient port and road operations
(COVID-19) in China could present an • Dealer partners seeking timeline
opportunity for India Reduction in Import duties (especially
extensions for EV
for BS-IV stock parts)
clearance
• India could be an alternative supply- • Extension to be provided till 30 days by
chain market, particularly for Supreme
Support OEMs, Dealer Principle byCourt for unsold
extending BS-IV stock
deadline for BS IV inventory sales
electronics manufacturing and auto • It permitted retailers to sell 10% of unsold
components sector Bharat Stage-IV vehicle inventory within
Restructuring of Interest rates on Automobiles
• Auto Component Segment can emerge 10 days of the current lockdown which
may not be sufficient time
as alternative source of supply if duly
supported by policy framework • OEMs
Subsidies and schemes from Industry point of view
should buy-back BS-IV (Will
stockhelp
fromin employment generation)
Dealer partners else it would be further
• Government to take initiatives and financial burden on Dealers
promote policies in favor of the Restructuring of GST slabs
Automotive Industry