E-commerce will get a huge boost in the post-covid-19 scenario and that may drive demand for commercial vehicles, Rajan Wadhera, president, Society of Indian Automobile Manufacturers (Siam) said.
He was talking on Mint’s Pivot or Perish webinar, which explores how the covid-19 pandemic disrupts the conventional ways of doing business.
Wadhera was citing a few changes anticipated by the automotive industry as it gradually resumes operations and seek stimulus from the government to revive demand.
Calling two- and three-wheelers and commercial vehicles as the objects of mobility, Wadhera said that these segments are likely see revolutionary changes.
“E-commerce will come up in a big way and that may result into increased demand for CVs,” he said.
The Siam president also added that auto industry may see changes in several facets of the trade including retail practices, dealing with labour and manpower among others.
“Industries may move into clusters into the rural areas because migrant labour may not return. So the industries may go where the labour is easily available,” added Wadhera.
Expressing his concerns on demand revival, Wadhera said that the supply side of the value chain is not the problem but the demand side is. “We will be able to restart 50-70% of our production. That’s not the problem. The demand side is a huge challenge. We need demand stimulus so that volumes can come back. That’s the biggest challenge the industry is going to face,” he added.
According to the Siam data, FY2019-20 reported 18% decline year-on-year for the passenger vehicle and the two-wheeler segments. The commercial vehicle segment dropped 29% YoY.
“With 45 days of shutdown already and the uncertainty going forward, we have two scenarios of GDP growth rate for FY2021. If India’s GDP grows 2-3% in FY21, then the auto industry volumes decline 18-24%. If the GDP remains flat or posts negative growth, the auto industry volumes will drop at least 35-40%,” he remarked.
“This means we will have two very bad back-to-back years and in such circumstances we will be doing volumes of what we used to do a decade by 2010-2011,” he said adding that the production units are expected to see only 50% capacity utilization this year.