Autos to electronic goods and home appliances, industry looking at an awful April – The Economic Times

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Impact on supplies of cars, two-wheelers, ACs, refrigerators and washing machines may show up as early as next week and supply challenges can get severe by early next month, companies said. They also said total business in April can decline by up to one-fourth of April 2019 level.

Unless rules are modified, Maharashtra’s quasi-lockdown will severely impact production of automobiles, electronic goods and home appliances. Several major manufacturers – Tata Motors, Mahindra & Mahindra, Volkswagen India, Bajaj Auto, LG India, Godrej Appliances, Haier and Carrier Midea, among others – have their plants in the state.

Impact on supplies of cars, two-wheelers, ACs, refrigerators and washing machines may show up as early as next week and supply challenges can get severe by early next month, companies said. They also said total business in April can decline by up to one-fourth of April 2019 level.

Maharashtra accounts for 20-25% of the total production of cars and two-wheelers and commercial vehicles in the country. It is also a critical hub for auto parts for vehicle-makers in south and north. Industry experts say a couple of weeks of restrictions can potentially stall auto factories around the country.

There are many single-source suppliers like sheet metal, suspension, polymers, forging parts from Maharashtra who supply vehicle makers in north and south.

Also, a significant share of auto-grade steel of Tata Steel and JSW is manufactured out of Maharashtra. A considerable supply of two-wheeler tyres from Ceat and off-highway tyres from Balkrishna Industries comes from Maharashtra plants.


Companies approach state government
Companies’ reading of Maharashtra’s rules are that all manufacturing barring agro-based and food processing units and export oriented units are likely to be shut. The final decision is likely to be taken by the committee headed by the chief minister.

A few companies with export orders and those who have facilities to house some of their factory workers have approached the state government for permission to continue skeletal production.

The state’s order to shut factories requiring oxygen can be a big dampener since the gas is required for welding and other production processes, industry executives said.

Haier India president Eric Braganza said the company has to shut down the factory, and that supply of ACs and refrigerators will “be a problem and it will hit business this month and next.”

LG India vice president Vijay Babu said while the company is in talks with the state to have a small level of production, it will maximise capacities in its Noida unit and expand the number of shifts. Companies fear that restarting production will also take some days after the quasi-lockdown is lifted on May 1 because most, if not all, contractual workers will go back home since transportation is open.

Godrej Appliances business head Kamal Nandi said another week will be lost to restart production once the government gives the go-ahead since they have to arrange for contractual labour and retrain them. “April sales could take a hit of almost 25% over 2019 due to supply crunch and closure of Maharashtra markets,” he said.

Major automakers Maruti and Hyundai may even stop manufacturing lines entirely thanks to Maharashtra’s rules, fear experts.

Large establishments having factories in and around Pune seem to have obtained an assurance from local authorities that operations can continue under certain norms.

Mahindra & Mahindra, in a late circular on Wednesday directed employees to report to work “as normal”, from Thursday in line with their shift schedule. ET has seen the letter. M&M operates a factory in Chakan, Pune and the letter suggests that they have some degree of comfort from the state government to continue operations.

The letter also stipulates employees above 45 years to carry valid vaccination certificate and for those below the specified age to carry negative results of RT-PCR or rapid antigen test. However, automobile industry executives expect a minimum impact of 20% on production, due to the strict norms.

Late on Wednesday, the Maharashtra state government allowed factories with processes that cannot be stopped immediately and units that take considerable time to restart, to continue operations with maximum 50% workforce. It further stipulated that these units must not be net consumers of oxygen.

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