Pivoting Towards Stability In The New Normal
The impression of COVID-19 on the automobile sector can be largely attributed to the counter measures, such as precautionary lockdowns, that impacted the production momentum.
The global economy is still coming to terms with the unforeseen impact of COVID-19. In India, the business landscape has also been greatly affected by the pandemic, especially the manufacturing sector - including automobiles and allied industries, who were already reeling under the effects of the slowdown. From operational continuity, revenues and liquidity to the safety and wellbeing of the workforce, the suddenness of the outbreak had a drastic impact on manufacturers.
The impression of COVID-19 on the automobile sector can be largely attributed to the countermeasures, such as precautionary lockdowns, that impacted the production momentum. For instance, the IHS Markit reported that India’s Manufacturing Purchasing Managers' Index (PMI) rose to 52 in August; signalling growth and rebound in production volumes, a first in six months. This infers that Indian automakers can very well stage a strong comeback by capitalizing on the demand and positive market sentiments.
There exists an opportunity to embrace the new normal to revive and reimagine new possibilities. The auto companies can build on the alterations in customers’ preference for personal mobility that are driven by the need for safety and hygiene. This is substantiated by the fact that the manufacturers have seen growth in most vehicle segments, as of August 2020. The two-wheeler segment has also reported positive growth, along with the passenger vehicle segment, on a year-on-year basis. The agrarian sector continued to operate even during the lockdown and was instrumental in driving demand for the industry. Additionally, considerable demand stemmed from commercial vehicles and replacement market.
Companies must maintain business readiness in order to overcome the challenges put in motion by the pandemic. The immediate objective for the Indian manufacturers should be to maintain sustainability and increase efficiencies. The lockdown also warranted structural reorganization to cut down the overheads; this leads to senior leadership taking pay cuts across the industry, and deferring CAPEX and investments. In the long-term, auto OEMs should aim to drive and sustain growth while strengthening their revenue streams.
From an operational perspective, accelerating the use of technology across the value chain aided in process optimization, supply chain management and inventory management etc. It also enabled transformation and faster adoption of new offerings in allied industries, such as the tyre segment, which saw an increased preference for connected mobility solutions and remote tyre health maintenance in the era of social distancing. Tapping into this trend much earlier, JK Tyre introduced its revolutionary Smart Tyre Technology that comes fitted with Tyre Pressure Monitoring Systems (TPMS) that preempt issues and suggest timely preventive measures.
Technology has also been at the heart of employee communication and worked wonders in keeping the colleagues motivated through a series of measures, such as virtual town halls, consultation with health professionals and breakout sessions. Due to the consistent digitally-enabled outreach, there has been a visible change in their outlook in form of higher productivity, work-life balance and willingness to hone new skills.
Digital has also become the backbone of business continuity by amplifying customer interaction in the absence of in-person engagement. For instance, partnerships with e-commerce platforms have gained precedence to establish a deeper connect with buyers. Traditional marketing has taken a backseat and digital marketing – powered by analytics - is the new and effective approach to understand consumer behaviour.
In the changed normal, India is coming forward as favoured destination for global manufacturing. The market optimism is further being amplified by the favourable policy framework, including the recent curbs on import of certain goods from China including Tyres. This bold step from the policymakers builds on the “Atmanirbhar” initiative, which will also provide a much-needed push to domestic manufacturers.
With continued support from the government and consumers, the automotive and allied sectors are likely to pick up pace further and build on the current momentum. Leveraging the trends of the new normal like diminishing use of mass transit, and putting forth a concerted effort, the auto industry can be the catalyst in uplifting the nation's economy.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house