Coronavirus: Auto industry needs low-cost products, localisation to stabilise business post-COVID-19, says Nomura

The automotive industry accounts for nearly 50 percent in India's industrial GDP and is one of the biggest employers - both through direct and indirect employment.

The domestic automotive industry will have to adopt various measures - like low-cost products, increased localisation, and automation - to stabilise business in the post-COVID-19 situation, according to a report.

In-plant stay of labour, enhanced health and safety practices, and investment in digitisation, are some of the steps, the industry will need to follow once the lockdown is lifted, it added.

Nomura Research Institute (NRI) Consulting and Solutions India in its report also pitched for stimulus packages to catalyse the restart of the industry.

It was already facing the demand slump for over one-and-a-half-year before the novel coronavirus hit the world, and subsequently the global economy.

As the coronavirus is wreaking havoc across the world and posing one of the biggest challenges to humanity, the devastating effect of this crisis on economies is very much visible, with the impact only expected to increase in the coming months, NRI India said in its report.

Product development, procurement, manufacturing, finance, logistics, sales, marketing, and after-sales are some of the challenges faced at each stage of the value chain, based on the context and configuration of each stage for different players, the report said.

It recommended that product development measures aimed at the significant trimming of cost-to-market for new products, and evolving customer needs, for example, adoption of cosmetic design changes to facilitate ease of surface disinfecting, will be key enablers, along with a continued focus on existing clean mobility solutions for stabilising business in the COVID-19 phase.

Push for localisation and ensuring supply continuity along with a critical review of inventory policies based on supply hiccups, in-plant stay of labour, enhanced health and safety practices, and increase in the degree of automation along with investment in digitisation are the few key suggestions in the report.

The report also called for consistency on government policies related to safety, and emissions to avoid undue stress and continuity of business plans along with stimulus packages to catalyse the restart of the industry.

"Evolving product features based on emerging hygiene and disinfection needs, localisation, increased degree of automation, digitisation and innovations in financing, and a set of economic stimulus by the government are the needs of the hour that will see us through this crisis," said Ashim Sharma, Partner and Group Head for Business Performance Improvement (Auto, Engineering, and Logistics), NRI Consulting and Solutions.

"This crisis brings to the fore an opportunity for Indian auto part makers to increase their participation in the global value chain, by becoming an alternative to China in the changing geopolitical world order, and for this in some cases, a technology acquisition may be imperative," the report said.

Given the financial distress across the world, the more financially sound players in the country could also acquire firms and technologies in this period, and that would help position them as effective alternatives while also furthering the true 'Make in India' spirit, it added.

Edited by Suman Singh


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