With Scrappage Policy auto industry can revive faster

  • Interviews
  • Jun 01,20
The Covid 19 pandemic is having enormous effects globally. The global economy has been hit hard, even worse than the Great Depression in 1930.
With Scrappage Policy auto industry can revive faster

The Covid 19 pandemic is having enormous effects globally. The global economy has been hit hard, even worse than the Great Depression in 1930. The automotive industry is heavily impacted due to the pandemic, globally. This year has begun with a speculation of volumes to hit 90 million worldwide and now it is predicted to fall to 68 million or may get worse. Anil Kumar, MD, SEG Automotive talks about the current challenges, implications of Covid 19, opportunities with Pushkar Oak in a video interaction.

Which of your facilities are operational? What care has been taken to ensure safety?

The sales in April are negligible. The positive news is that the factories are opening up and we are giving more focus on the safety and health of our workforce. This will be one of the very significant points of consideration when we resume our operations. We had issued guidelines for resuming operations already in April. We have resumed operations in three locations—Bangalore, Hassan, and Chennai on May 4. These plants are operational in just one shift.

What are the current challenges that SEG Automotive is tackling through?

The key challenge that we are facing currently is that of ramping up our supply chain. In the automotive industry, if one component is missing, it becomes difficult to produce a car. Similarly, for auto component suppliers like us, all our suppliers need to be present and active. But the current situation, some of them could be possibly located in the containment zones. Some of our suppliers are also active in those areas as well. For such suppliers located in the containment areas, we have a de-risking mechanism to supply our components safely.

Currently, how will the supplier ramp up look like is a big concern? It has on one end demand generation and the other control of the spread of the Covid 19.

A key factor that can influence demand generation is government initiatives like Scrappage Policy. If Scrappage Policy comes into the picture; we have a good chance for faster revival. GST cut is another way and liquidity in the industry will also play a major role.

What implications do you see in the auto components post Covid 19?

We are entering a phase of new normal as Covid 19 will have its implications in the operations. The new normal will see an increase in virtual interface and usage of digital platforms; no touch or low touch at the point of contact; work from home for employees; and digital business transactions.

Manufacturing will still require people to come and add value to what they do. But there will be a considerable change in the standard operating procedures (SOPs). We may also see some new operational standards in manufacturing.

Our focus in the short term is the safety and health of our associates; smooth ramp up through our value chain; focus on liquidity; adapting to changing environments and adapt to the new normal.

Do you believe in digitalisation to increase speed in the supply chain operations?

The digitalisation was already coming up in 2018-19, but now post-Covid 19 the speed of digitalisation will pick up pace. The ordering placing, the (EDIs) Electronic Data Interchanges will be virtual and will become fast and paperless.

This is an opportunity to relook and make systems efficient. The real value adds will not change but the way it is produced will change, but the rest of the peripherals like office work, transactions will have sudden change.

 What opportunities Indian component manufacturers can look at post-Covid 19?

The domestic market in India is extremely strong. India will have the highest population of middle-class in the next 5-6 years and the employable workforce. With ‘Make In India’ Indian component manufacturers have a lot of scope in the domestic market itself due to disrupted supply chain.

Covid 19 has exposed a lot of supply chain issues where companies were importing a lot of sub-assemblies, components, subparts from Europe, China, and other nations; there is a unique chance of localising the component and push manufacturing in a bigger way. Doing so, it will generate economies of scale, giving cost advantage. Strong domestic market and localisation gives us a competitive edge to become competitive worldwide. It is a step-by-step process and India is on a journey to become a hub for competitive export. 

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