Unperturbed by impact on production, OEMs are sticking to Q1 targets; here’s why.. – ET Auto

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With large order books, companies such as Maruti Suzuki, Tata Motors, M&M and others continue to manufacture vehicles in order to cut short the rise in waiting periods across different states, says a senior executive requesting anonymity.

By Amit PandayNew Delhi: Vehicle manufacturers such as Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Tata Motors Ltd, Mahindra and Mahindra Ltd (M&M), Bajaj Auto Ltd and others continue to hold their June quarter production targets despite a substantial impact on their daily operations, at least four industry executives told ET Auto.

The number of new COVID-19 cases once again touched new peak levels on Friday when India recorded 3.46 lakh cases and about 2,600 casualties in a single day. Reportedly, the country has now recorded more than a million new Coronavirus positive cases over the last four days alone, highest in the world.

Production to continue“The infection under the second wave is everywhere. There is not even a single vehicle manufacturing plant across the country that has not identified new COVID-19 cases this year,” a senior executive said, requesting anonymity.

He said while those who are identified as COVID positive are isolated and the companies are coming forward to bear the medical expenses, the production lines continue to remain operational adhering to all the protocols issued by the respective state governments.

“With large order books, companies such as Maruti Suzuki, Tata Motors, M&M and others continue to manufacture vehicles in order to cut short the rise in waiting periods across different states,” he said.

Models such as the top-end Maruti Baleno and Swift, Tata Altroz and Nexon, Mahindra Thar and Bolero have waiting periods ranging from two to ten months, or even more in some regions.

“Vehicle manufacturers, especially the ones with models that have a long wait list in the market have clearly told their suppliers to maintain the production levels,” another executive at a parts supplier said.

Suppliers told to maintain production schedules

Besides ensuring that the backlog is cleared at the earliest, the suppliers are also being encouraged to possibly avoid any production cuts and follow the given plan for Q1 because stocking up ready-to-use-components is better than running out of them later, he said.

A senior executive at a supplier of electronic parts with plants in Pune and Chennai confirmed, “all OEMs are holding on to their schedules. No one wants to reduce.”

In order to clear all backlog at the earliest, the suppliers are being encouraged to possibly avoid any production cuts and follow the given plan for Q1 because stocking up ready-to-use components is better than running out of them later.Senior Executive (requests anonymity)

“There are no revisions in the quarterly production plan as of now but this is an evolving situation,” said another senior official at a key supplier of critical engine parts to several vehicle manufacturers, requesting anonymity.

Last year, a complete shutdown of manufacturing units for over three weeks resulted in a sharp drop in the economic activities, straining government’s finances, widening fiscal deficits, salary cuts and job losses across sectors.

Manpower is an emerging issue

Meanwhile, the auto component suppliers have already started facing a shortage of manpower across production sites in the most impacted regions.

“The current lockdown in six states is having an immediate impact on manufacturing. The volume is already down by 40% and there is uncertainty in the market. Also, semi-automated setups that depend on manpower, such as ours, are facing a double whammy as worker availability is down by 30%-40%,” Sharad Malhotra, president – automotive refinishes and wood coatings, Nippon Paint India, said.

“However, we are concerned that if the lockdown continues past the end of the month, it would have a significant effect on the overall supply chain, which is still recovering from last year’s shutdown and production loss, and we will have to wait for 6-9 months, if not a year, for it to recover,” Malhotra added.

OEMs follow protocols

In an attempt to control the COVID-19 spread and ramp up the medical facilities to contain the rising number of deaths, states such as Maharashtra, Rajasthan, Madhya Pradesh, Delhi, Chhattisgarh and some cities in Uttar Pradesh are restricting people movement legally.

Tata Motors is running operations at its Pune plant in strict compliance with the guidelines. A limited number of employees are attending duties adhering to all safety protocols, distancing norms and hygiene standards. We continue to remain vigilant about the safety and well-being of our employeesSpokesperson, Tata Motors

Last week, the Maharashtra state government had released a break-the-chain circular, which entailed manufacturing units in the state to operate at no more than 50% of the manpower. Meanwhile, it is reported that several districts in Karnataka, including Bengaluru, which has emerged as the district with highest number of covid-19 active cases in India, has also gone into a two-week closure.

“The production of light vehicles was expected to grow by about 31% this year as several new model launches were planned. Almost 42% of this growth was expected to come from the new models to be produced in Maharashtra alone. The industry is in a wait-and-watch mode due to the disruptions caused by the second wave of COVID-19 cases,” Gaurav Vangaal, associate director, light vehicle production forecast, IHS Markit, said.

Maruti Suzuki, Hyundai and Bajaj Auto did not respond to the queries sent by ET Auto.

Declining to comment on the impact on production and Q1 targets, Tata Motors and M&M said their manufacturing units continue to follow the state government’s break-the-chain mandate.

“Tata Motors is running operations at its Pune plant in strict compliance with the guidelines. A limited number of employees are attending duties adhering to all safety protocols, distancing norms and hygiene standards. We continue to remain vigilant about the safety and wellbeing of our employees,” a company spokesperson said in a statement.

“In addition to the mandated testing, screening at plant gates is robust and if a symptomatic case is identified, we ensure that the employee is isolated and provided with all support for quarantine and contact tracing thereafter,” the statement added.

Rajeshwar Tripathi, chief human resources officer, automotive and farm sectors, M&M, said, “In accordance with the guidelines, our plants are operational with lower levels of manning and following strict adherence to social distancing, hygiene protocols and safety. Highest level of precaution and care is being taken including compulsory testing for COVID-19 at the plant.”

“We have also established company-maintained quarantine centers for our associates at hotspots like Mumbai and Pune and we are providing for complete medical assistance where required, in collaboration with hospitals at all locations,” Tripathi said.

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