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How this pandemic will change the Auto Industry?

How this pandemic will change the Auto Industry?

 

Most car manufacturers are appearing brave even when some manufacturing facilities are shut down due to pandemic. The pressure to move to Bharat Norm 6 is escalating. People have reduced the travel when they’ve realized how much they can do it from home.

The automobile sector was bracing for a harsh year even before Corona virus wreaked havoc with their best laid plans.

The sector is set to reshape in ways that will have a significant effect on the eight million workers around the world who work for auto companies.

 

The effect due to COVID-19:

For the first time in history, the Indian automobile sector reported almost Nil monthly sales. Car producers disclose nil performance numbers on account of the closing of manufacturing plants in April 2020. This is because of a national lock down in the battle against the corona virus pandemic. Changes in consumer behavior and the effects of COVID-19 is expected to affect car sales. COVID-19 has resulted in disruptions in the supply chain and its effect on employment, wages, and so far most showrooms have seen few visitors. When sales tend to drop, closing down underutilized plants can be a concern of survival. According to Peter Wells, founder of the Center for Automotive Industry Research, several of the major plants in Europe are still going to struggle.

This will be challenging for companies that manufacture smaller cars that appear to be less competitive, such as Volkswagen, Renault, and Fiat. Nissan intends to slash about 300 billion Yen in annual operating expenses and book investment charges while the COVID-19 pandemic further disturbs the automotive industry’s revenues. According to Toyota Motor Corp, the terrible economic effect of the COVID-19 pandemic was almost over, vehicle sales can be recovered in its largest markets by the end of the year. Toyota has cash stockpiles of $74.4 billion, the result of a decade-long effort to cut costs. According to Frank Witter, Chief Financial Officer of Volkswagen AG, nobody has a clear understanding of the period and intensity of the crisis. Some auto manufacturers are collecting cash and slashing expenses to ensure that they will withstand a protracted downturn.

 

BS-VI:

The move to BS-VI standards is to put pressure on the auto sector. Besides, the effects of BS-VI emission regulations and job losses will affect sales. The problems of the automobile industry are growing. For the Indian car industry, FY20 has been a difficult year. After facing market crunch due to GST and the upcoming BS-VI standards, the corona virus desperately hampers vehicle production in all categories. Combined with the market restriction arising from BS-VI standards, this has generated a cascade impact for the sector that is unlikely to bounce back soon.

 

Electric vehicles:

Electric vehicle sales have been remarkably robust though, lock-down sales of petrol and diesel-driven automobiles have slowed. As much of Europe closed in March, auto sales in the continent dropped by more than half. However, the registration of Electric vehicles grew by 23 percent. Sales of electric vehicles fell 31 percent in April. This is nothing compared to the overall European automotive industry, which dropped by 80 percent. Auto producers may not be as inspired to market hybrid vehicles over the coming months. Alternatively, they will be forced to drive SUVs that yield much greater revenues and are cheaper to market now that fuel costs have collapsed. Everything is going to rely on policy opportunities and regulations.

China and Europe are more encouraging than the United States to embrace electric vehicles. Electric Vehicles are also much more costly than petrol and diesel-driven. In this crisis, few customers will be able to buy it without subsidies. The government will create a scrapping program to promote battery-driven cars with tax cuts to subsidies. The emphasis needs to be on investing in regional manufacturing around the supply chain, upgrading skills, and building up EV Infrastructure throughout the nation.

 

About the stock:

The Nifty auto index has under-performed the market since January as it is not hopeful of any near term improvement in the sector prospects. Mahindra & Mahindra has a Market cap of Rs.47,402.93 crore. Its 52 weeks low is Rs.245.40 and its 52 weeks high is Rs.683. M&M’s closing price was Rs.381.30 and was 4.78 percent low. Maruti Suzuki’s 52 weeks low is Rs.4,001.10 and its 52 weeks high is Rs.7,758.70 having a market cap of Rs.1,54,032.08. Maruti Suzuki’s closing price was Rs.5100.40 and was 0.27 percent low.

 

 

Auto sector seeks special package to save industry from Covid-19 crisis

Equity Right

Trends transforming the automotive industry.

Trends transforming the automotive industry.

 

The automobile market is undergoing a profound transition in terms of its far-reaching effect on business and its customers. This estimates the structural transformation of the automobile sector in terms of timescale, complexity, and quantity. One of the industries that has been under extreme stress over the past two years is heading for another turbulent year of falling revenue, growing costs, and ever-present government regulations. Driving is going to be convenient, simpler, cheaper, and safer. At the very same point, the revolution in personal transportation will push the automobile industry to redefine itself to some degree.

 

Electrified:

The move to emission-free transition will become a universal necessity. Electric power used to power cars will gradually come from renewable power to maintain carbon dioxide-free mobility. The shift to emission free human autonomy will not be feasible without the electrification of the running rail. Firstly, there is the problem of local materials. The reality is that vehicles are still producing very small amounts of toxic contaminants, noise, and air pollution. It also suggests that the emission-free effort will be a regional one. The energy used to power cars should come from green sources to guarantee CO2-neutral mobility. After all, the vehicles of tomorrow will not only be a subject of mutual and autonomous proportions but will also be wired and electrified. Owing to the accelerated growth of electric cars, it can be concluded that the overwhelming majority of automobiles will be e-vehicle.

 

Autonomous:

The development of cars that do not need human interaction will reduce the usage of shared transportation systems and give personal transportation to different consumer groups. The exponential advances made in fields such as machine learning and artificial intelligence make it easier to accomplish that appeared impossible – i.e. the creation of automated cars, which do not need human interaction except in complicated traffic scenarios. This will redefine the usage of human mobility channels. It is probably attribute to the reality that the electrified and autonomous aspects are equally compatible. The proportion of shared and automated vehicles in the total road network will improve dramatically.

 

Car sharing:

Properly operated fleets of autonomous cars can lower the cost of transport dramatically by allowing more effective usage of costly mobile infrastructure. Over several years, many metropolitan areas have provided car-sharing services. Although, these are still mostly conducted as pilot projects or citizens’ programs. Exchanging ideas may become commercially feasible with the advent of automated vehicles. It will no longer be appropriate to look for a shared car in the local area. It will be possible to request vehicles anywhere the customer might be via a flexible on-demand platform. Although, station-based ride-sharing indicates that cars will only be obtained from predefined locations. The region of distribution for car-sharing represents the supplier’s market field. Ride-hailing is about taking a ride. This definition is increasing in prominence and will no longer be considered a fringe trend.

 

Demand for smaller cars:

Possible pay reductions, work shortages, declining wages, and no incentives will all cause Indian customers to be suspicious of investing mega-money on new cars. After the lock down is removed, the market for smaller cars like Tiago, Santro, Celerio, and WagonR, etc. will rise. Citizens will usually be suspicious of commuting through public transit if and when they are accessible to the public because of worries of being infected. They will like to drive in their automobiles and will opt to purchase a 2-wheeler or smaller vehicle without needing to pay so much on luxury SUVs, hatchbacks, or sedans. Maruti Suzuki will be the major winner of all of this and will undoubtedly improve its market share by new product releases and price cuts to target the middle-class community.

 

Used cars:

Used vehicles will be the kind of the post-COVID-19 world. A survey revealed that the inquiries for pre-own vehicles multiplied during the lock down time frame. Purchaser viewpoint appeared to be more rounded among the individuals who enquired about used vehicles. 77% of them were happy to proceed with their buy after the lock down. It was noticed that an impressive level of respondents liked to purchase old vehicles because of budget restrictions. The used car would profit most as people switching from a public vehicle to a private vehicle. With India’s auto industry is facing depression for more than a year and the Covid-19 shutdown now expected to deepen and the financial pressure of the mid-income class, used cars might end up being a go-to option.

 

Online portal:

The auto sector registered a major decrease in sales due to COVID-19 and BSVI. In the past few months, several automotive makers have switched to the online platform to improve demand. Hyundai, Honda, BMW, Maruti Suzuki, and others consider that this is an opportunity to reach out to potential customers as additional support to dealers. Automobile manufacturers are offering schemes to help customers easily buy their vehicle in the middle of the lock down. Auto OEMs try to concentrate further on the digital world to boost demand. Most dealerships and retailers will focus on expanding their digital presence, providing pick-up and delivery of cars for service and sale, and giving consumers a smooth shopping interface to achieve loyalty.

 

 

Importance of Financial Literacy.

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Automakers come up with unique schemes to push sales.

Automakers come up with unique schemes to push sales.

 

Leading passenger car makers are partnering with NBFC’s and banks to give consumers competitive financing solutions and improve market sales. In the  several early months, a potential customer will choose to pay considerably low installments and afterwards increase the percentage payable at a pre-specified rate.

 

Maruti Suzuki:

Maruti Suzuki India Ltd has collaborated with bankers such as ICICI Bank Ltd to include EMI of a maximum of Rs 899 for the first 3 months of its loan value of Rs 1 lakh. Another scheme lets borrowers pay EMI as small as Rs 1797 per lakh over the term of service, including the last payment where the borrower charges one-fourth of the loan value. The Delhi-based auto manufacturer has also partnered with banks to finance 100 percent of the automobile on-road. The firm has recently collaborated with Cholamandalam, to provide plans in which consumers will not have to pay EMI during the first 2 months. Maruti Suzuki has allied with HDFC Bank’s aim of providing financing options to vehicle buyers. Advantages will include low monthly payments over three months each year, up to 100% on-road financing, etc. This will benefit consumers in the entry-level categories in general. Together under tie-up, consumers can make use of a step-up EMI plus balloon plan with a monthly installment of Rs 1,111 per lakh for a loan period of 84 months.

 

Car leasing:

Maruti Suzuki is currently proposing leasing automobiles to its customers via dealer networks. This change will add optimism to Maruti Suzuki distributors at a time when the company has been under continuous stress owing to decreasing domestic revenues and the financial crisis triggered by the COVID-19 pandemic. This scenario can be suitable for the release of such services by Maruti, as city buyers are likely to favor the vehicle leasing system, rate drop, cost-effectiveness, and less burden on leased automobiles. Innovation presents an interesting alternative for the recovery of demand of purchase of cars in city centres.

 

Hyundai:

In the meantime, Hyundai Motor India Ltd is now offering its automobiles on lease. The car manufacturer considers this scheme to increase demand. The Hyundai Assurance Program will be provided on selected Hyundai car variants bought during May 2020. It will also protect the buyer for a term of 1 year since the date of delivery of the vehicle. They introduced a special and industry-leading EMI Assurance Program. It will offer young buyers of Hyundai employed in private companies complete peace of mind through this period and build optimistic and secure feelings for the purchase of Hyundai vehicles.

 

M&M:

M&M, the manufacturer of Scorpio and Bolero SUV, has now launched car loan plans under which consumers are subject to a 90-day suspension or may pay in 2021. In a 8-year loan period, a 90-day payment moratorium including 100 percent on-road financing, to enable buyers conveniently acquire their cars will be provided in the middle of the lock down. According to the company, the policies provide a 50 percent rebate from the payment charge and the opportunity to “buy now, pay later” for the doctor’s segment, a strong reimbursement program for security officers. While, woman consumers will be entitled to a 10-point reduction on the cost of borrowing. The car manufacturer now gives consumers the option of buying a BSVI-compliant pick-up and charging the same EMI as the BS-IV model while, the SUV buyer will now buy the model now and begin paying the monthly installment from 2021. Also, the firm is selling BS-VI vehicles on the same monthly installation as the previous BS-IV platform. In this program, the EMI for funded vehicles begins with as small as Rs 1,234 per lakh.

 

Volkswagen:

Volkswagen India has announced a leasing and lending service. In a bid to improve demand and render its vehicles available to customers, the German automaker has unveiled different ownership options, including rental and buy-back options. According to the company, new ownership models have been introduced, predicting that consumers are progressively looking at personal travel through mass transit and car-sharing. Such new initiatives can be used across every dealer network. Whereas, the rental period can vary from 2 to 4 years. Clients can also make use of zero down payment together with premiums, servicing and some other costs provided by the scheme. The lease program also offers buyers the ability to switch to certain Volkswagen vehicles. Although, Tiguan and Vento can be purchased under the promised buy-back program, the business has indicated that more versions will be put within this scheme.

 

Nissan:

Nissan has also launched Buy Now-Pay Later from January 2021 on selected models.

 

Tata Motors:

Under its latest Keys of Safety financing system, Tata Motors revealed a personalized EMI program for its Tiago model starting at Rs 5,000 per month for 6 months. As per the update, the EMI sum is slowly raised over a cumulative duration of 5 years. Consumers can select between three choices before waiting for their final EMI. Also providing 100% on-road financing for the full line of automobiles and SUVs.

 

Skoda:

Skoda Auto India and Toyota Kirloskar Motor claim to give pre-qualified buyers a zero own payment plan. Even though Toyota has extended the offer to pick customers depending on their credit scores, Skoda is now extending the EMI vacation to four months to six months.

 

Honda:

Honda Cars India give cash discounts of up to Rs 1 lakh on specific variants.

 

 

 

Fertilizers, Steel, Cement, and Electricity. How these sectors performed in April 2020.

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Auto sector seeks special package to save industry from Covid-19 crisis

Auto sector seeks special package to save industry from Covid-19 crisis

 

A few automobile producers have supported the decision of PM Narendra Modi to inject Rs.20 lakh crore financial package announced on 12th May, 2020. Most of them still want to see a particular stimulus program aimed at reviving the automobile sector. They is seeking to recover from the outbreak of the COVID-19 pandemic and the recession that has struck the sector from last year. The overwhelming reaction will go a long road ahead towards strengthening the Indian economy and preparing it for post-pandemic revival. It will also help business initiatives to get millions of Indian people back to work safely and mitigate the spread of the COVID-19.

 

Problems faced by the auto sector:

It is recognized that the automobile industry is a big pillar of the Make in India and contributes a significant part of the country’s GDP. The sector often provides job opportunities for thousands of individuals and utilizes an unaccented supply chain. As indicated by Society of Indian Automobile Manufacturers (SIAM), the Indian automotive sector registered a decrease of more than 18 percent in sales of 2,15,48,494 units and a decline of 15 percent in vehicle yield to 2,63,62,284 units in FY20. CV revenue over this time fell by 28.75 percent to 7,17,688 units year-on-year. A release from SIAM reported that the automobile industry was bleeding Rs. 2,300 Crore regularly. The economic plan will also provide funding for the auto sector which will be of great benefit.

While these factories now have the freedom to restart dealerships and begin manufacturing again, they remain handicapped as they can not run at 100 percent. The staff at such plants has declined dramatically as a consequence of the COVID-19 pandemic. Without a doubt, the last few months have been tough for not just the people of India, but also the international automotive sector. Though, the Minister for Road Transport and Highways, Nitin Gadkari, has assured India of a policy of scrapping cars, there is no guarantee as to the other demands raised by the sector so far. Having been economically ineffective over the last few months, particularly in April, when auto firms have for the first time reported zero sales in history. This economic stimulus package could be the only thing expected to get the business back to its original state.

 

Relief:

The package revealed by the Prime Minister will arrive as a significant boost to the auto sector, particularly during this lock down. However, with this recent plan, events may be turned around shortly. Many automotive manufactures and regulators of the auto sector have come forward in favor of the proposal. Economic assistance will be required to restore what remains of the automotive sector following the pandemic.

 

Package:

The Rs 20 Lakh Crore package involves the Reserve Bank’s liquidity initiatives and interest rate cuts, as well as the Rs 1.7 Lakh Crore Free Food Grains to Poor and cash to Poor Women declared in March. Although, the March stimulus amounted to 0.8% of GDP, RBI’s interest rate reductions and liquidity enhancing initiatives amounted to 3.2% of GDP. The package will concentrate on laws, liquidity, property, labour. It would include various sectors, including the agricultural industry, the middle class, small and medium-sized businesses, and employees. Self-reliant India will stand on five pillars viz demand, technology-driven system, vibrant demography, infrastructure, and economy. The package accounts for around 10 % of GDP, rendering it one of the highest in the country. India has been on the scientific front in the war against Covid-19.

According to SIAM President Rajan Wadhera, this will indeed provide the right stimulus for the market and rise of our economy. The automotive sector is a solid base of Make in India with major contributions to GDP and employment, and it relies on its supply chain. The package can give tax cuts to small scale and medium-sized organizations and open doors for improving local interest. Anand Mahindra, Chairman of the Mahindra Company, expressed gratitude toward Prime Minister Narendra Modi of a need to render India self-reliant and the 20 Lakh Crore financial package. The introduction of this package to the tune of 10 % of GDP can help all segments of the economy. Indian auto manufacturers have proposed multiple measures to restart the market, such as a temporary tax cut on automobiles, as well as proposals to scrap old vehicles.

 

 

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