Impact of COVID-19: Series 1

 

 COVID-19 Responses For Automotive Companies

 

The COVID-19 pandemic has pushed humanity and the global economy into a crisis not seen since The Great Depression. This development is disrupting value chains, communication, and co-operation amongst business environments. Moreover, it is difficult to estimate when these lockdown norms, presently applicable to about half of the world’s population.

The first step towards identifying the short- and medium-term outcomes of COVID-19 for business environments, and building out strategies to prepare for them, is to identify the unknowns that can influence these outcomes. two most critical uncertainties – the unknowns that are most relevant and have the most potential to define future scenarios.

Based on our analysis and findings, the ‘Extent of Government Policy Support and Stimuli’ and the ‘Efficacy of Healthcare Response’ are the two most critical uncertainties in the present situation. Based on the scenarios, the possible outcome might be, The V-Curve (Short-term disruption), The U-Curve (Medium-term disruption), The L-Curve (Long-term disruption), The W-Curve (Medium-term disruption).

The auto sector had already undergone considerable slowdown over the last 12-18 months due to structural changes beginning with the Goods and Services Tax, shift to Shared Mobility, Axle-load reforms, the Bharat Stage-IV (BSIV) to Bharat Stage-VI (BS-VI) transition, Liquidity Crunch, and so on. The COVID-19 lockdown has had a multiplier effect – the industry has almost been at a complete standstill since 24 March. Indian automotive industry is likely to witness a prolonged U-shaped recovery (Scenario 2), with a best-case recovery to FY19 sales volumes expected by FY22.

It is apparent that stakeholders across the automotive ecosystem need to prepare and plan to rebound in a phased manner while bracing for a long-term impact. Following are some themes along which players need to act to make themselves battle ready:

Engage with customers and the dealer network, Manage the liquidity crunch in the system, Actively contribute to fighting the pandemic, Plan well for the post-COVID-19 the situation, Plan for a spike in demand for personal mobility solutions, Assess and de-risk supply chain dependencies, Re-assess upcoming launches and financing offerings, Prioritize focus on employee safety and care, Capture opportunity to consolidate operations, Plan for shifting mobility preferences of the consumer, Adopt digitalization of consumer touchpoints to supplement physical sales, Explore offerings around the hyper-local delivery model, Redesign manufacturing architecture and supply chain processes.

It is therefore likely, that the auto sector may head towards an even more prolonged W-shaped recovery instead, wherein a second bout of the pandemic follows the initial remission. Companies must look to identify the onset of such a scenario by tracking and observing certain indicators, so that they are well prepared to respond to the second wave and minimize both, financial losses and the ensuing structural damage to the value chain.

While the initiatives discussed across respond, recover and reinvent for the U-shaped recovery remain valid even in this scenario, companies should prioritize to secure their supply chains and develop trigger-based micro work-plans in partnership with the network to ensure adequate working capital to weather the next storm.