Component industry in standby and observation mode while Chinese firms open on February 10
Chennai: With the opening of supplies from China since February 10, the automotive components industry keeps its fingers crossed in the hope that the inventory situation will improve in the coming days. However, according to the companies that compose it, it is expected that the factories currently affected will operate at a third of their capacity and, if things are not relieved, the production lines could be affected. Until now, the stock accumulated before lunar holidays continues to work for parts manufacturers. Meanwhile, component companies that have offices and factories in China, such as the Motherson Group, for example, are also sending supplies such as facial masks to Shanghai through Dubai.
“The factories were supposed to open from February 10, but most started with an assistance of 30% to 35%. It is likely to increase up to 50% in the coming days. Late work is slowly clearing, but we will know the scenario in the next few days when the first lots arrive at the airports, ”said Hemant Sikka, president-CPO, Powerol&Spares Business, M&M.
For Indian parts companies, that means a definitive production interruption. India imports auto parts worth $ 4 billion, although a large part of those parts also affects the secondary market. “We have established a command center in Shanghai and we are receiving daily updates (for our operations there). We are sending masks from Dubai. Optically, volumes could be affected due to the shortage of parts from China. February 10 was the end of the lunar calendar, but it remains to be seen when Chinese factories open and send materials. A lot of suppliers of level 2, level 3 and car manufacturers are also conducting lunar vacations (stocks). Apart from our plants and the people there, it all depends on how long it lasts. Some suppliers have issued force majeure notices to original equipment manufacturers in the United States, but we have not received force majeure notices, said Vivek Chaand Sehgal, president of Motherson Group during a call from investors on Monday.
Components industry sources say that much will also depend on how individual parts manufacturers manage their value chain. There are alternative suppliers and, sometimes, the same supplier may have an alternative manufacturing site that is not in the affected central area, a senior industry official said. The big problem will be with the electronic and electrical parts that can hold the assembly line. However, the ACMA industrial body is in standby and observation mode. “Coronavirus is a global risk, but it is currently too early to say how badly India will be affected. Some global multinational providers have invoked a force majeure clause according to their global policy as a preventative, but for us it is still too early to assess the exact impact, ”said ACMA President Deepak Jain of Lumax.