The Coronavirus (COVID-19) outbreak in China and South-East Asia has destroyed nearly half of the region affected by the deadly virus which accounts of over 3% of the total population in both the regions. As per the ICRA, China and other south-east Asian countries play a major role in the automotive supply chain for India and many other APAC and European countries.
In our Case, China accounts for almost 27% of our Auto component imports which holds an estimated value of USD 4.8 billion, which is just an estimated amount and it could go higher for high value-add and customised components, ICRA said in a statement.
Usually, companies do keep a buffer stock which lasts for a maximum time of four-six weeks but if the situation in China and other countries remain persistent due to the coronavirus the potential supply chain will face a severe blow in the coming weeks.
Read More: FADA asks all auto bodies to shift to BS6 units with immediate effect
Speaking on the current situation, Shamsher Dewan, Vice-President – Corporate Sector Ratings, ICRA Ltd said “The impact is estimated to be higher for high value-add and customised components, while commoditised products could shift to alternative suppliers. But high investments and gestation period involved in developing tooling remain the key prohibitive factor for an immediate shift to new suppliers,”
Suggested Read: India to switch to the world’s cleanest petrol and diesel from April 1!
Adding further Dewan also stated, “Moreover, given that OEMs are currently in the period of transitioning to BS-VI production, disruption in the supply of critical components required for the same has the potential to impact the smooth transition to new emission norms.”
However, In the case of two-wheeler’s the price hike in the BS6 variants and the muted urban demand will remain slow and will be that of the auto components segments.
Not to miss: India’s Vehicle Scrapping Policy | An Insight
