COVID-19

Ammar Master, Senior Manager, Asia Pacific Vehicle Forecasts

05 March 2020

“I’m not a virus”

“I’m not a virus, I’m a human. Eradicate the prejudice”, read the placard of a student from Wuhan, who in early February stood on a busy pedestrian street in Florence and symbolically donned a black blindfold and protective mask. His silent appeal was as stark as it was poignant, drawing an extraordinary reaction from the public as they spontaneously hugged the masked stranger. Footage of the event has since been shared widely on social media and serves as a moving reminder of the repercussions of a virus outbreak on social mores and interaction.

On a less esoteric level, the repercussions of the coronavirus outbreak are being felt far and wide. Supply chains across industries globally have been disrupted, not least the automotive industry in China and beyond.

While the spread of COVID-19 in China appears to have been contained to some degree – for the time being at least – the virus is now proliferating across the world, even to seemingly unconnected countries. And we could be looking at a scenario where localised eruptions continue to occur throughout 2020.

More importantly, the final toll on human life and the outbreak’s impact on global economies may not be become fully apparent until 2020 comes to a close.

The Indian automotive industry, which is still reeling from the worst sales slump in more than 20 years, also faced supply shortages of several components from China. This is likely to hit output in February and March.

Not only that but automakers in India are having to tread a fine line by balancing their output of BS-IV versus BS-VI models prior to the implementation of the stricter BS-VI regulations in April this year. Given the unpredictability of the consumer response to the shift to BS-VI vehicles, Indian production volumes could suffer over the coming months.

We currently expect Light Vehicle production in India to average 339,000 units per month for the next six months. That said, there is a nominal downside risk if the virus outbreak in China deteriorates significantly as this would lead to a greater shortage of components.

Other headwinds that could undermine sales (and production) this year include relatively weaker GDP growth; financial sector stress; global uncertainty and its impact on exports, investments and the economy; and brewing social tensions triggered by a new citizenship law, as so startlingly demonstrated by the recent Hindu-Muslim clashes in Delhi that led to 47 fatalities.

On balance, however, the Indian market remains more susceptible to domestic rather than external risks.