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COVID-19 response for automotive companies
A scenario-based approach to assess and minimise the impact of
COVID-19
April 2020
ii
COVID-19 response for automotive companies
01
COVID-19 response for automotive companies
Contents
The situation and the challenge 02
The unknowns 	 03
Why scenarios 	 04
Scenario framework for the COVID-19 situation	 05
Possible consequences of COVID-19 scenarios on India’s overall outlook	 07
Impact of COVID-19 on the Indian automotive ecosystem	 09
Potential implications for the Indian automotive ecosystem	 11
References	 14
Contact Us	 15
Acknowledgements	 15
02
COVID-19 response for automotive companies
The situation and the challenge
The COVID-19 pandemic has pushed humanity and the global
economy into a crisis not seen since The Great Depression.
Due to its high infection rate and impact on the public health
system, governments have begun to enforce nationwide
lockdowns, thereby significantly affecting production, supply
chain, travel, trade, and how people work. This development
is disrupting value chains, communication, and co-operation
amongst business environments. Moreover, it is difficult to
estimate when these lockdown norms, presently applicable
to about half of the world’s population1
, will be relaxed
completely, resulting in even more uncertainty about the
future of many of these affected businesses. In these uncertain
times, companies seek clarity on, and a robust strategy for,
short- to medium-term implications (6-24 months) stemming
from COVID-19. Some of the key hindrance faced by the
companies are in the form of the following:
01 0302 04
Increasing volatility
of business
environments
Interconnectedness
and unpredictability
of influencing factors
Excess information,
untrustworthiness
of sources,
unpredictable
political development
Ambiguous
interpretations of
information leading
to possibly wrong
assumptions
03
COVID-19 response for automotive companies
How good will
policymakers be
at keeping the
‘lights-on’?
040302
The unknowns
The first step towards identifying the short- and medium-
term outcomes of COVID-19 for business environments, and
building out strategies to prepare for them, is to identify the
unknowns that can influence these outcomes.
The unknowns may range from the changes in the structure
and integrity of technological systems (i.e., the ability to
digitalise work processes, while ensuring data security)
to changes in the society, like values, ethics and ways of
Figure 1. Key unknowns in the future of COVID-19 business environments2
How long will the
pandemic last? Will a
vaccine arise?
For how long
will shutdowns
persist?
How vast will
the knock-on
effects be?
working (e.g., need for social distancing, role of altruism).
Uncertainty may also exist in the way future governments
will function as well as how the corporate landscape will
shape out, including permanent shifts in customer demand,
flexible employment models, etc. Figure 1 illustrates the
unknowns across key dimensions that are sector-agnostic,
and are likely to play a crucial role in shaping how the
next 12 months will look like. Of these, the four ‘biggest’
unknowns in our opinion are as follows:
Systemic
breakdown
Shortage
Sustained
isolation
Everybody for
themselves
Shattered
forever
Complete
Confusion
Uncontrolled
Spread
Mistrust
Cautious
Inferior
Efficiency
Destruction
Not
perceivable
Reactive;
Limited
Financial
Crisis
Painful but
Resilient
Abundance
Temporary
Interruption
Reemergence
of the Tribe
Back to
Normalcy
Plannable
Sustained
Containment
Cooperation
Now more
than ever
Superior
Efficiency
Limited Impact
Immediate
Proactive;
Significant
Stabilization
Resilience of Supply Chains
Supply of Workforce
Mobility of People and Goods
Cohesion of the Society
Global Trade Flows
Information Transparency
Efficacy of Healthcare Response
Cooperation among Governments
Enforcement of COVID-19
Business Regulations
Global Corporate
Investment Appetite
Efficiency of Company Digitalization
Robustness of Ecosystems
Rebound of Consumption
Extent of Government Policy
Support and Stimuli
Financial Market Volatility
With Force With Measure
01
04
COVID-19 response for automotive companies
Why scenarios
Decision-makers face formidable challenges, as taking the
long view has never been harder. They have to make the best
possible judgement calls every day while the world around
continues to be uncertain, volatile, and ambiguous. One
way to do so is to develop robust and strategically relevant
scenarios that can respond to, and can take advantage of,
the many plausible outcomes for the future.
While predicting the future is impossible, anticipating
plausible scenarios in these circumstances is more robust
than predicting traditional forecasts for the most optimal
future – preparing for a reasonable ‘worse’ case scenario
rather than a simple extrapolation exercise. In contrast to
forecasting, scenarios examine what is most uncertain and
surprising, as a mechanism to generate insight and provoke
action regarding future-focused risks and opportunities.
Scenarios are a tool to uncover blind spots and broaden
perspectives about alternative future environments in which
today’s decisions might play out.
05
COVID-19 response for automotive companies
Scenario framework for the
COVID-19 situation
Monitor Deloitte’s proprietary scenario planning process
begins with defining the focal question that captures the core
issue to be explored through the scenarios. In the current
circumstances, we identify the focal question to be – “How will
the future of COVID-19-affected business environments
shape out? What will be the impact on the automotive
sector?”
Having identified the major unknowns that may impact the
future business environments, we proceed to singling out
the two most critical uncertainties – the unknowns that are
most relevant and have the most potential to define future
scenarios. Based on our analysis and findings, the ‘Extent of
Government Policy Support and Stimuli’ and the ‘Efficacy of
Healthcare Response’ are the two most critical uncertainties
in the present situation (Figure 2). The uncertainties, along with
their two extreme end-points, when superimposed, give rise to
four plausible scenarios of the future (Figure 3).
These scenarios can be mapped directly to Deloitte’s
proprietary COVID-19 scenarios being short-term, medium-
term, and long-term disruption.
Figure 2. Critical uncertainties and their endpoints3
Uncontrolled Spread
•	 Slow technological progress to
develop a quick, accurately and
cheap medical test to detect the
presence of the virus
•	 Lack of support by the
administration to ensure
adherence to social distancing
norms
•	 Inability to mobilise adequate
healthcare professionals
and infrastructure to isolate/
quarantine those infected
Reactive and Limited
•	 Lack of decisive measures to
stabilise the economy with a
significant infusion of funds into
the banking system
•	 Inefficient transmission of
financial aid to small businesses,
MSMEs and daily-wage workers
dependent on regular cash-flow
•	 Inefficient management of efforts
to drive consumption and turn-
around businesses most severely
affected by this pandemic
Sustained Containment
•	 Breakthrough in testing speed
and accuracy; governments
capable of carrying out widespread
testing at much lower costs
•	 Strict enforcement of social
distancing and quarantine
measures to ‘flatten the curve’
and prevent any recurrence of the
infection
•	 Availability of adequate
infrastructure and professionals
to tackle possibility of massive
outbreaks
Proactive and Significant
•	 Measured and timely
intervention by the central bank to
infuse adequate liquidity to drive
consumption
•	 Government-funded bail-out
of industries disrupted by the
pandemic; short-term working
capital support to keep them afloat
•	 Reforms in the unorganised sector;
timely and adequate downturn
compensation for MSMEs and
daily-wage workers
Extent of Government Policy
Support and Stimuli
Efficacy of Healthcare Response
06
COVID-19 response for automotive companies
Scenario - 2
The U-Curve (Medium-term disruption) The virus’s spread is contained but not supported by adequate/timely economic
stimulus to support failing businesses; structural damage to the economy impacts the fundamental dynamics of many
industries, resulting in long-lasting effects followed by a slow and muted recovery.
Scenario - 3
The L-Curve (Long-term disruption) The virus continues to spread and causes disruption globally; inadequate economic
stimuli leads to major structural damage to the economy and long-term recession; there is permanent loss of output as firms
go bankrupt and employment and production levels take a long time to revive.
Scenario - 4
The W-Curve (Medium-term disruption) The virus continues to spread, but strong policy response keeps economic growth
afloat; recurrences of the pandemic are seen, but businesses adapt through mini-recoveries, and head towards a slow, near-
complete recovery.
Scenario 2: The U-Curve
Medium-term
disruption;
significant,
contained loss
Long-term
disruption; severe,
permanent loss
Short-term
disruption;
moderate,
contained loss
Medium-term
disruption;
significant,
recurrent loss
Scenario 3: The L-Curve
Scenario 1: The V-Curve
Proactive and
Significant
Reactive and
Limited
Sustained
Containment
Uncontrolled
Spread
Scenario 4: The W-Curve
Figure 3. The four plausible scenarios of the future3
Scenario - 1
The V-Curve (Short-term disruption) Successful containment of the virus, supported by strong policy response prevents
permanent structural damage; the agile response by businesses after removal of restrictions results in sharp recovery.
EfficacyofHealthcareResponse
Extent of Govt. Policy Support and Stimuli
07
COVID-19 response for automotive companies
Possible consequences of
COVID-19 scenarios on India’s
overall outlook
Of the four scenarios discussed in the previous section, we
believe that one of Scenarios 2 or 4 – The ‘U-Curve’ and the
‘W-Curve’ are most probable to materialise in the overall Indian
context. In other words, the government may look to boost
the measures it has taken to support the economy through
appropriate policy interventions and adequate stimuli, if the
contagion continues to spread and affect larger sections of the
society relentlessly. This section narrates the ‘scenario stories’
that are likely to emerge.
The U-Curve: The pandemic continues to spread globally,
but robust healthcare systems are able to ‘flatten the curve’
in several countries. Movement restrictions remain stringent
until the end of 2020, with varying degrees of relaxation
introduced for different businesses, with strict directives to
maintain hygiene and social distancing norms. The impact of
the pandemic will remain for over two years, with tenuous
recovery beginning only in FY2022, and remaining modest
for the next four quarters. Across the globe, the recovery is
unsynchronised with the Asian economies recovering faster.
Global supply chain disruptions cause stress on several
industries that depend on imported raw materials, with
some shortages lasting for over six quarters before seeing
any signs of recovery. The most affected industries are likely
to see prolonged liquidity crunch, restricted working capital,
and reduction in production capacity due to withdrawal by
investors. This may result in several businesses filing for
bankruptcy, necessitating intervention by the government in
the form of additional stimulus.
On the demand side, high unemployment, increased
household debt, and lengthier lockdowns continue to
impact consumer demand for goods and services, with
most consumers putting off big-ticket purchases such as
automobiles and home renovations for the long term. Even
after the pandemic dissipates, consumers are wary of major
expenses and instead opt to increase their savings, a reversal
from the trend observed in India during 2018-2019. Pent-up
demand is likely to break-through eventually, reviving well after
mid-FY2022.
In the financial services sector, MSMEs default in large numbers
and big firms delay debt payments leading to an extreme
financial crisis. As a result, capital markets shed off over a
decade’s gains, and liquidity dries up in short-term money
market. Several small banks liquidate as the money market
goes dry and margins fall, while a few choose to consolidate
with larger banks. Reduction in policy rates to maintain
liquidity leads to inflationary pressures coinciding with a rise in
pent-up demand. Overall, the country sees tepid growth for
the next 5-6 quarters, after which it slowly heads towards
the pre-COVID growth trajectory.
The W-Curve: The pandemic continues to spread globally
for a prolonged period with recurrent waves of infection
observed in many countries. Movement restrictions continue
to remain stringent, with major ‘hotspots’ locked down for over
two quarters with varying degrees of restriction. Businesses
gradually resume operations in a phased manner, with
continued emphasis on ensuring high standards of hygiene
at workplaces. The impact of the ongoing slowdown is felt for
the next three to four quarters, with recovery observed from
FY2022. There is a high likelihood of the pandemic recurring
after a short period of remission. However, its impact is largely
mitigated by better preparation and robust contingency plans
by all stakeholders – the government, the businesses, and the
public. Full-fledged and synchronised global recovery is seen
from Q3 FY2022, as governments across the world enforce
decisive policies to effectively ‘flatten the curve’ and minimise
the impact on the economy.
As China takes time to revive production, supply chain
disruptions cause stress on several industries that are
dependent on Chinese imports. This results in an opportunity
for others, who look to build capabilities to indigenise
08
COVID-19 response for automotive companies
production, reduce import dependence, and in fact present
the world with an alternative source for products. For this to
materialise, however, industries and the government need
to collaborate to set up the required infrastructure. Several
industries endure severe slowdown and liquidity crunch
for about three to four quarters. However, the government,
which plays a proactive role in enabling smooth running of the
economy, bails out/ supports these industries through timely
macro- and micro-interventions.
On the demand side, high unemployment, piling household
debt and lengthy lockdowns affect consumer spending until
the end of 2020. There is a lag of three to four months in
demand recovery after the removal of restrictions as people
remain in fear of falling sick. As a result, spending picks up in
early FY 2022, largely driven by pent-up demand, and recovers
to near-2019 levels by mid-FY2022
In the financial services sector, poor credit demand and
collections results in worsening of Indian banks’ balance sheet,
with non-performing assets jumping up to double digits.
However, stress on the sector starts reducing after policy
interventions and financial stimulus help augment demand
and aid recovery of manufacturing industries. As a result, the
first wave of economic recovery begins in three to four
quarters, potentially followed by a longer, but less painful
period of recurrent bouts of slowdown.
09
COVID-19 response for automotive companies
Impact of COVID-19 on the Indian
automotive ecosystem
Having visualised the likely scenarios that the broader
Indian economy may head towards, we now discuss the
implications that the COVID-19 pandemic is likely to have on
the Indian automotive ecosystem, i.e., auto original equipment
manufacturers (OEMs), auto component manufacturers
(ACMs), dealers, auto finance companies, etc.
The auto sector had already undergone considerable
slowdown over the last 12-18 months due to structural
changes beginning with Goods and Services Tax, shift to
Shared Mobility, Axle-load reforms, the Bharat Stage-IV (BS-
IV) to Bharat Stage-VI (BS-VI) transition, Liquidity Crunch and
so on. The COVID-19 lockdown has had a multiplier effect –
the industry has almost been at a complete standstill since
24 March4
. A prolonged truncation of demand due to the
lockdown may further dampen consumer sentiments and
significantly affect auto OEM revenues and cash flows. In
response, companies may resort to starving their RD funding
in order to sustain core operations, and potentially set back the
progress made on alternate fuel and mobility technologies by
two to four quarters. Eventually, some companies may even
choose to take a strategic call to exit unprofitable markets and
vehicle segments. Based on our understanding of the industry,
and supplemented by discussions with leading auto OEMs
and ACMs, we believe that the Indian automotive industry is
likely to witness a prolonged U-shaped recovery
(Scenario 2), with a best-case recovery to FY19 sales volumes
expected by FY22.
Auto dealers have been unable to deliver vehicles during
lockdown, and have reported 20-30 days of finished goods
inventory5
, likely to be heavily discounted post lockdown.
Further, with BS-VI sales mandated from 10 days after
lockdown ends (and sale of only 10% of the existing BS-IV
inventory in those 10 days)6
, dealers face significant burden to
liquidate unsold BS-IV inventory, estimated to be worth ~INR
10
COVID-19 response for automotive companies
6,300 Crore7
. In this scenario, OEMs will need to support dealer
groups, both financially and otherwise, further stressing their
own balance sheets.
Auto-suppliers have a high dependence on migrant labour,
whose absenteeism is expected to further delay revival
post lockdown, resulting in a domino effect on the entire
value chain. Suppliers facing liquidity issues may succumb
to deteriorating market conditions, causing widespread
disruption across the entire manufacturing ecosystem. Larger
players may look to acquire these struggling suppliers in order
to realise operational synergies.
Captive finance companies of OEMs are also expected to face
the brunt, as the number of loan defaults are likely to go up,
leading to high non-performing assets (NPAs). On the other
hand, new customer loan disbursement is expected to go down
significantly, as determining the credit worthiness of potential
customers is likely to be a challenge. Both of these outcomes
will hit the firms’ profitability and question the feasibility of
continuing operations in these market conditions.
Lastly, the prolonged lockdown will put tremendous strain on
the operations of other smaller players (mobility solution
providers, used-car players, and after-market service
providers) whose funding depends heavily on aggressive
revenue growth projections. Shared mobility players (ride
sharing, car sharing, ride hailing) may have to rethink their
offerings, as it is very likely that customers may end up
preferring private modes of transportation that guarantee
‘social distancing’, at least in the short term.
Figure 4. The 3-phase action plan for companies3
Respond
Immediate
(during the lockdown)
1-2 months*
* May vary depending on lockdown duration
Recover
Mid-term
(just post the lockdown)
3-8 months
Reinvent
Long-term
(permanent changes)
9 months +
11
COVID-19 response for automotive companies
Figure 5. Potential actions for auto companies3
Potential implications for the
Indian automotive ecosystem
It is apparent that stakeholders across the automotive
ecosystem need to prepare and plan to rebound in a phased
manner, while bracing for a long-term impact. While they may
respond by taking some actions immediately, they must also
consider preparing in advance to launch initiatives just after
lockdown ends, and recover by capturing maximum value.
In addition to these short-term actions, players also need to
respond to permanent disruptions that this pandemic may
have brought about (e.g. consumer behaviour, dependence on
global networks), and prepare to reinvent their businesses
with long-term interventions (Figure 4).
We discuss some themes around which players need to act to
enable themselves to be ‘battle-ready’ for their quest to revive
the industry and their respective businesses (Figure 5). These
themes are relevant to the prolonged U-shaped recovery that
the auto industry is likely to undergo.
Respond
Engage with customers and the dealer network: Reduced
engagement due to lockdown could affect both customer
loyalty and the OEM-dealer connect
•	 	Help dealership teams upskill through refresher virtual
trainings, online certifications and gamified solutions
•	 	Share relevant do-it-yourself videos on social media to
engage with customers
Manage the liquidity crunch in the system: Crunch of
working capital due to tepid sales is likely to cripple the smooth
functioning of the network
•	 	Provide financial support to dealers and suppliers (e.g.,
provide longer credit period, expedite incentives disbursal,
fund capex, relieve interest burden for few weeks)
•	 	Introduce cost-cutting measures for non-essential
activities/suspend discretionary spends to maintain
liquidity
Actively contribute to fighting the pandemic: OEMs will
be expected to do whatever within their means to help raise
awareness, provide infrastructure
•	 	Side-pocket existing production lines into producing
products for healthcare (e.g., sanitizers, personal protective
equipment)
Respond
Respond
Reinvent
Engage with customers
and the dealer network
Plan for spike in
demand of personal
mobility solutions
Adopt hygiene-centric
process and design
changes
Assess and de-
risk supply chain
dependencies
Prioritize focus on
employee safety and
care
Plan for shifting mobility
preferences of the
consumer
Manage the liquidity
crunch in the system
Re-assess upcoming
launches and
financing offerings
Capture opportunity
to consolidate
opportunity
Prepare for an
omnichannel sales
experience
Explore alternate
revenue options
Adopt digitalization of
consumer touchpoints
Actively contribute to
fighting the pandemic
Explore offerings around
hyper-local delivery
model
Plan well for the
post-COVID-19 situation
Redesign manufacturing
architecture and supply
chain processes
12
COVID-19 response for automotive companies
•	 	Take initiative to support the affected – e.g., support
for all unorganized/ contract workers in the automotive
ecosystem
Plan well for the post-COVID-19 situation: Opportunity for
players to rethink their way ahead and develop appropriate
strategies to navigate the post-crisis situation
•	 	Plan to efficiently manage the warranty and dealer claims,
which are expected to surge, once lockdown ends
•	 	Design trigger-based contingency plans including, and
in alignment with the entire network to manage working
capital needs
Recover
Plan for spike in demand of personal mobility solutions
(vis-à-vis shared solutions): Increased aversion to use shared
mobility and public transport may result in a spike in demand
for 2-wheelers, entry-level 4-wheelers and pre-owned vehicles
immediately after lockdown
•	 	Increase focus on “Push” (targeted marketing) to identify
prospects rather than relying on traditional “Pull” sources
•	 	Design special financing schemes for purchase of vehicles
to help customers tide over liquidity crunch
Assess and de-risk supply chain dependencies: High
dependency on global auto parts (esp. from China) led to
bottlenecks in the supply chain long before the pandemic
actually hit India
•	 	Plan for short-term demand skew for spare parts;
undertake risk assessment of supply chain (suppliers,
logistics etc.)
•	 	Use analytics to better monitor the supply-demand gap
and design short-term response strategies accordingly
Re-assess upcoming launches and financing offerings:
Reduced discretionary spends may push customers to shift to
lower-priced segments and variants
•	 	Re-assess launch timelines to prioritize products in the
lower-price segments to avoid loss of market share
•	 	Redesign loyalty programs to demonstrate and retain
lifetime value, and overcome the drop in premium
purchases
Prepare for an omnichannel sales experience: Even after
the lockdown, customers may not want to visit crowded
dealerships or interact with the sales staff in person
•	 	Explore the concept of virtual sales consultants, and
remote demonstration of vehicles
•	 Explore the feasibility, capabilities and partnerships
required in setting up an integrated online-offline sales
channel
Adopt hygiene-centric process and design changes: The
consumer expectation of hygiene, sanitization standards are
expected to be more than the current standards maintained by
dealers
•	 	Include sanitization/fumigation as part of workshop
services, test-drive, etc.
•	 	Identify innovative solutions to design “No-Contact”
customer journeys and transactions
Prioritize focus on employee safety and care: Healthy,
engaged and committed employees are likely to be the most
essential resource for any player looking to stage a swift
recovery
•	 	Redesign safety norms in offices and plants to ensure
robust medical security systems and adequate health
training for all
•	 	Deploy flexible employment systems to ensure a healthy
working environment – both medically and mentally
Capture opportunity to consolidate operations: High
financial strain on smaller players to operate in low-sales
period may force them to close/ sell the business
•	 	Evaluate synergies and look at potential alliances/
partnerships/acquisitions
•	 	Explore new sources of funding such as private equity for
highly stressed dealers and service providers
Explore alternate revenue options: Financial pressures
due to loss of business and high fixed costs will require new
sources of income to recover the losses incurred
•	 	Focus on allied product and services like accessories,
value added services in workshop, concierge services, etc.
•	 	Re-prioritize existing strategic projects and advance their
timelines
Reinvent
Plan for shifting mobility preferences of the consumer:
Long-term impact on the growing trends for premiumisation,
shared mobility, OEM-fleet partnerships; growing preference
for low-touch sales and service experiences, new ownership
models that are cash-flow friendly
•	 	Review current alliances with cab service providers; focus
on new alliances that are expected to gain importance in
future such as leased vehicles, corporate tie-ups etc.
Adopt digitalisation of consumer touchpoints to
supplement physical sales: The trend of e-commerce
platforms for end-to-end online car purchase is likely to find
more acceptance among Indian customers, given higher
convenience
•	 	Set up partnerships with dealerships, financial service and
e-commerce players to design a completely digitalised
13
COVID-19 response for automotive companies
customer journey for sales and service; helps decongests
physical outlets and allows seamless delivery in areas with
low dealership penetration
Explore offerings around hyper-local delivery model:
Increased preference of customers to avoid crowded
marketplaces, and prefer no-contact transactions
•	 Align product and customer strategies (e.g. e-bikes for last
mile delivery) with the upcoming trends in home delivery
•	 Offer alternate asset ownership models to e-commerce
players to reduce the financial burden of high upfront capex
Redesign manufacturing architecture and supply chain
processes: The financial impact of a high fixed-cost model
and an import-reliant supply chain has been severely felt by all
players
•	 Accelerate the indigenisation of auto components to
increase self-sufficiency and minimize risk of supply chain
breakdowns
•	 Adopt new business models that shift costs from fixed to
variable nature, thereby reducing the breakeven volume
•	 	Invest in developing early warning systems/ downturn
planning to be able to respond faster in similar future
scenarios – agility-driven forecasting
The themes and the illustrative responses mentioned are
expected to help auto companies prepare for an expected
U-shaped recovery. It is essential to note that this expectation
is built on the prevailing condition of the auto industry, and the
understanding of the pandemic’s likely spread, the time it takes
for containment, and the impact of these events specifically on
the auto industry. However, the behaviour of the virus in reality
(development of more robust strains vs. development of a
vaccine) and the time it takes to contain the spread (2 quarters vs.
4+ quarters) are factors that are difficult to predict with certainty.
It is therefore likely, that the auto sector may head towards an
even more prolonged W-shaped recovery instead, wherein
a second bout of the pandemic follows the initial remission.
Companies must look to identify the onset of such a scenario
by tracking and observing certain indicators, so that they are
well prepared to respond to the second wave and minimize
both, financial losses and the ensuing structural damage to the
value chain.
Some of the indicators that may point towards such a
possibility are
•	 Reversal in the decreasing trend or a continuous increase in
the number of infected cases
•	 Increase in number of infection ‘hotspots’
•	 Reinforcement/ continuation of lockdown norms, especially
in large cities, etc.
•	 Reports of recurrent waves in other economies
•	 Delay in the development of a vaccine
•	 Discovery of alternate strains of the virus
Persistence of these indicators can be a clear sign for auto
companies to prepare themselves. While the initiatives
discussed across respond, recover and reinvent for the
U-shaped recovery remain valid even in this scenario,
companies should prioritize to secure their supply chains and
develop trigger-based micro work-plans in partnership with
the network to ensure adequate working capital to weather the
next storm.
14
COVID-19 response for automotive companies
References
1.
	 ‘Coronavirus: Half of humanity now on lockdown as 90 countries call for confinement’, Euronews, 3rd April, 2020, https://www.
euronews.com/2020/04/02/coronavirus-in-europe-spain-s-death-toll-hits-10-000-after-record-950-new-deaths-in-24-hou
2.
	 COVID-19 Strategic Response Lab, Centre for the long view, Monitor Deloitte
3.
	 Deloitte India analysis
4,5.
	 ’Auto dealers fear they will not be able to liquidate BS-IV stock before March 31 deadline: FADA’, The Economic Times, 9th
March, 2020, https://economictimes.indiatimes.com/industry/auto/auto-news/auto-dealers-fear-they-will-not-be-able-
to-liquidate-bs-iv-stock-before-march-31-deadline-fada/articleshow/74552112.cms?utm_source=contentofinterestutm_
medium=textutm_campaign=cppst
6.
	 ’Two-wheeler makers’ huge BS-IV inventory will not go away post lockdown’, The Hindu Business Line, 3rd April, 2020,
https://www.thehindubusinessline.com/news/two-wheeler-makers-huge-bs-iv-inventory-will-not-go-away-post-lockdown/
article31246258.ece
7.
	 ‘Lockdown leaves India's car dealers with the battle of their lives’, Economic Times, 26th March, 2020, https://m.economictimes.
com/industry/auto/auto-news/lockdown-leaves-indias-car-dealers-with-the-battle-of-their-lives/articleshow/74810838.cms
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COVID-19 response for automotive companies
Contact Us
Acknowledgements
Rajeev Singh
Partner, Consulting and Deloitte India
Automotive Sector Lead
Deloitte Touche Tohmatsu India LLP
Phone +91 124 679 2927
E-mail: rpsingh@deloitte.com
Harsh Kapoor
Partner,
Consulting
Deloitte Touche Tohmatsu India LLP
Phone +91 124 679 2876
E-mail: harshkapoor@deloitte.com
Atul Jairaj
Associate Director,
Consulting
Deloitte Touche Tohmatsu India LLP
Phone +91 22 6122 8000
E-mail: ajairaj@deloitte.com
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COVID-19 Response By Automotive Companies

  • 1. COVID-19 response for automotive companies A scenario-based approach to assess and minimise the impact of COVID-19 April 2020
  • 2. ii COVID-19 response for automotive companies
  • 3. 01 COVID-19 response for automotive companies Contents The situation and the challenge 02 The unknowns 03 Why scenarios 04 Scenario framework for the COVID-19 situation 05 Possible consequences of COVID-19 scenarios on India’s overall outlook 07 Impact of COVID-19 on the Indian automotive ecosystem 09 Potential implications for the Indian automotive ecosystem 11 References 14 Contact Us 15 Acknowledgements 15
  • 4. 02 COVID-19 response for automotive companies The situation and the challenge The COVID-19 pandemic has pushed humanity and the global economy into a crisis not seen since The Great Depression. Due to its high infection rate and impact on the public health system, governments have begun to enforce nationwide lockdowns, thereby significantly affecting production, supply chain, travel, trade, and how people work. This development is disrupting value chains, communication, and co-operation amongst business environments. Moreover, it is difficult to estimate when these lockdown norms, presently applicable to about half of the world’s population1 , will be relaxed completely, resulting in even more uncertainty about the future of many of these affected businesses. In these uncertain times, companies seek clarity on, and a robust strategy for, short- to medium-term implications (6-24 months) stemming from COVID-19. Some of the key hindrance faced by the companies are in the form of the following: 01 0302 04 Increasing volatility of business environments Interconnectedness and unpredictability of influencing factors Excess information, untrustworthiness of sources, unpredictable political development Ambiguous interpretations of information leading to possibly wrong assumptions
  • 5. 03 COVID-19 response for automotive companies How good will policymakers be at keeping the ‘lights-on’? 040302 The unknowns The first step towards identifying the short- and medium- term outcomes of COVID-19 for business environments, and building out strategies to prepare for them, is to identify the unknowns that can influence these outcomes. The unknowns may range from the changes in the structure and integrity of technological systems (i.e., the ability to digitalise work processes, while ensuring data security) to changes in the society, like values, ethics and ways of Figure 1. Key unknowns in the future of COVID-19 business environments2 How long will the pandemic last? Will a vaccine arise? For how long will shutdowns persist? How vast will the knock-on effects be? working (e.g., need for social distancing, role of altruism). Uncertainty may also exist in the way future governments will function as well as how the corporate landscape will shape out, including permanent shifts in customer demand, flexible employment models, etc. Figure 1 illustrates the unknowns across key dimensions that are sector-agnostic, and are likely to play a crucial role in shaping how the next 12 months will look like. Of these, the four ‘biggest’ unknowns in our opinion are as follows: Systemic breakdown Shortage Sustained isolation Everybody for themselves Shattered forever Complete Confusion Uncontrolled Spread Mistrust Cautious Inferior Efficiency Destruction Not perceivable Reactive; Limited Financial Crisis Painful but Resilient Abundance Temporary Interruption Reemergence of the Tribe Back to Normalcy Plannable Sustained Containment Cooperation Now more than ever Superior Efficiency Limited Impact Immediate Proactive; Significant Stabilization Resilience of Supply Chains Supply of Workforce Mobility of People and Goods Cohesion of the Society Global Trade Flows Information Transparency Efficacy of Healthcare Response Cooperation among Governments Enforcement of COVID-19 Business Regulations Global Corporate Investment Appetite Efficiency of Company Digitalization Robustness of Ecosystems Rebound of Consumption Extent of Government Policy Support and Stimuli Financial Market Volatility With Force With Measure 01
  • 6. 04 COVID-19 response for automotive companies Why scenarios Decision-makers face formidable challenges, as taking the long view has never been harder. They have to make the best possible judgement calls every day while the world around continues to be uncertain, volatile, and ambiguous. One way to do so is to develop robust and strategically relevant scenarios that can respond to, and can take advantage of, the many plausible outcomes for the future. While predicting the future is impossible, anticipating plausible scenarios in these circumstances is more robust than predicting traditional forecasts for the most optimal future – preparing for a reasonable ‘worse’ case scenario rather than a simple extrapolation exercise. In contrast to forecasting, scenarios examine what is most uncertain and surprising, as a mechanism to generate insight and provoke action regarding future-focused risks and opportunities. Scenarios are a tool to uncover blind spots and broaden perspectives about alternative future environments in which today’s decisions might play out.
  • 7. 05 COVID-19 response for automotive companies Scenario framework for the COVID-19 situation Monitor Deloitte’s proprietary scenario planning process begins with defining the focal question that captures the core issue to be explored through the scenarios. In the current circumstances, we identify the focal question to be – “How will the future of COVID-19-affected business environments shape out? What will be the impact on the automotive sector?” Having identified the major unknowns that may impact the future business environments, we proceed to singling out the two most critical uncertainties – the unknowns that are most relevant and have the most potential to define future scenarios. Based on our analysis and findings, the ‘Extent of Government Policy Support and Stimuli’ and the ‘Efficacy of Healthcare Response’ are the two most critical uncertainties in the present situation (Figure 2). The uncertainties, along with their two extreme end-points, when superimposed, give rise to four plausible scenarios of the future (Figure 3). These scenarios can be mapped directly to Deloitte’s proprietary COVID-19 scenarios being short-term, medium- term, and long-term disruption. Figure 2. Critical uncertainties and their endpoints3 Uncontrolled Spread • Slow technological progress to develop a quick, accurately and cheap medical test to detect the presence of the virus • Lack of support by the administration to ensure adherence to social distancing norms • Inability to mobilise adequate healthcare professionals and infrastructure to isolate/ quarantine those infected Reactive and Limited • Lack of decisive measures to stabilise the economy with a significant infusion of funds into the banking system • Inefficient transmission of financial aid to small businesses, MSMEs and daily-wage workers dependent on regular cash-flow • Inefficient management of efforts to drive consumption and turn- around businesses most severely affected by this pandemic Sustained Containment • Breakthrough in testing speed and accuracy; governments capable of carrying out widespread testing at much lower costs • Strict enforcement of social distancing and quarantine measures to ‘flatten the curve’ and prevent any recurrence of the infection • Availability of adequate infrastructure and professionals to tackle possibility of massive outbreaks Proactive and Significant • Measured and timely intervention by the central bank to infuse adequate liquidity to drive consumption • Government-funded bail-out of industries disrupted by the pandemic; short-term working capital support to keep them afloat • Reforms in the unorganised sector; timely and adequate downturn compensation for MSMEs and daily-wage workers Extent of Government Policy Support and Stimuli Efficacy of Healthcare Response
  • 8. 06 COVID-19 response for automotive companies Scenario - 2 The U-Curve (Medium-term disruption) The virus’s spread is contained but not supported by adequate/timely economic stimulus to support failing businesses; structural damage to the economy impacts the fundamental dynamics of many industries, resulting in long-lasting effects followed by a slow and muted recovery. Scenario - 3 The L-Curve (Long-term disruption) The virus continues to spread and causes disruption globally; inadequate economic stimuli leads to major structural damage to the economy and long-term recession; there is permanent loss of output as firms go bankrupt and employment and production levels take a long time to revive. Scenario - 4 The W-Curve (Medium-term disruption) The virus continues to spread, but strong policy response keeps economic growth afloat; recurrences of the pandemic are seen, but businesses adapt through mini-recoveries, and head towards a slow, near- complete recovery. Scenario 2: The U-Curve Medium-term disruption; significant, contained loss Long-term disruption; severe, permanent loss Short-term disruption; moderate, contained loss Medium-term disruption; significant, recurrent loss Scenario 3: The L-Curve Scenario 1: The V-Curve Proactive and Significant Reactive and Limited Sustained Containment Uncontrolled Spread Scenario 4: The W-Curve Figure 3. The four plausible scenarios of the future3 Scenario - 1 The V-Curve (Short-term disruption) Successful containment of the virus, supported by strong policy response prevents permanent structural damage; the agile response by businesses after removal of restrictions results in sharp recovery. EfficacyofHealthcareResponse Extent of Govt. Policy Support and Stimuli
  • 9. 07 COVID-19 response for automotive companies Possible consequences of COVID-19 scenarios on India’s overall outlook Of the four scenarios discussed in the previous section, we believe that one of Scenarios 2 or 4 – The ‘U-Curve’ and the ‘W-Curve’ are most probable to materialise in the overall Indian context. In other words, the government may look to boost the measures it has taken to support the economy through appropriate policy interventions and adequate stimuli, if the contagion continues to spread and affect larger sections of the society relentlessly. This section narrates the ‘scenario stories’ that are likely to emerge. The U-Curve: The pandemic continues to spread globally, but robust healthcare systems are able to ‘flatten the curve’ in several countries. Movement restrictions remain stringent until the end of 2020, with varying degrees of relaxation introduced for different businesses, with strict directives to maintain hygiene and social distancing norms. The impact of the pandemic will remain for over two years, with tenuous recovery beginning only in FY2022, and remaining modest for the next four quarters. Across the globe, the recovery is unsynchronised with the Asian economies recovering faster. Global supply chain disruptions cause stress on several industries that depend on imported raw materials, with some shortages lasting for over six quarters before seeing any signs of recovery. The most affected industries are likely to see prolonged liquidity crunch, restricted working capital, and reduction in production capacity due to withdrawal by investors. This may result in several businesses filing for bankruptcy, necessitating intervention by the government in the form of additional stimulus. On the demand side, high unemployment, increased household debt, and lengthier lockdowns continue to impact consumer demand for goods and services, with most consumers putting off big-ticket purchases such as automobiles and home renovations for the long term. Even after the pandemic dissipates, consumers are wary of major expenses and instead opt to increase their savings, a reversal from the trend observed in India during 2018-2019. Pent-up demand is likely to break-through eventually, reviving well after mid-FY2022. In the financial services sector, MSMEs default in large numbers and big firms delay debt payments leading to an extreme financial crisis. As a result, capital markets shed off over a decade’s gains, and liquidity dries up in short-term money market. Several small banks liquidate as the money market goes dry and margins fall, while a few choose to consolidate with larger banks. Reduction in policy rates to maintain liquidity leads to inflationary pressures coinciding with a rise in pent-up demand. Overall, the country sees tepid growth for the next 5-6 quarters, after which it slowly heads towards the pre-COVID growth trajectory. The W-Curve: The pandemic continues to spread globally for a prolonged period with recurrent waves of infection observed in many countries. Movement restrictions continue to remain stringent, with major ‘hotspots’ locked down for over two quarters with varying degrees of restriction. Businesses gradually resume operations in a phased manner, with continued emphasis on ensuring high standards of hygiene at workplaces. The impact of the ongoing slowdown is felt for the next three to four quarters, with recovery observed from FY2022. There is a high likelihood of the pandemic recurring after a short period of remission. However, its impact is largely mitigated by better preparation and robust contingency plans by all stakeholders – the government, the businesses, and the public. Full-fledged and synchronised global recovery is seen from Q3 FY2022, as governments across the world enforce decisive policies to effectively ‘flatten the curve’ and minimise the impact on the economy. As China takes time to revive production, supply chain disruptions cause stress on several industries that are dependent on Chinese imports. This results in an opportunity for others, who look to build capabilities to indigenise
  • 10. 08 COVID-19 response for automotive companies production, reduce import dependence, and in fact present the world with an alternative source for products. For this to materialise, however, industries and the government need to collaborate to set up the required infrastructure. Several industries endure severe slowdown and liquidity crunch for about three to four quarters. However, the government, which plays a proactive role in enabling smooth running of the economy, bails out/ supports these industries through timely macro- and micro-interventions. On the demand side, high unemployment, piling household debt and lengthy lockdowns affect consumer spending until the end of 2020. There is a lag of three to four months in demand recovery after the removal of restrictions as people remain in fear of falling sick. As a result, spending picks up in early FY 2022, largely driven by pent-up demand, and recovers to near-2019 levels by mid-FY2022 In the financial services sector, poor credit demand and collections results in worsening of Indian banks’ balance sheet, with non-performing assets jumping up to double digits. However, stress on the sector starts reducing after policy interventions and financial stimulus help augment demand and aid recovery of manufacturing industries. As a result, the first wave of economic recovery begins in three to four quarters, potentially followed by a longer, but less painful period of recurrent bouts of slowdown.
  • 11. 09 COVID-19 response for automotive companies Impact of COVID-19 on the Indian automotive ecosystem Having visualised the likely scenarios that the broader Indian economy may head towards, we now discuss the implications that the COVID-19 pandemic is likely to have on the Indian automotive ecosystem, i.e., auto original equipment manufacturers (OEMs), auto component manufacturers (ACMs), dealers, auto finance companies, etc. The auto sector had already undergone considerable slowdown over the last 12-18 months due to structural changes beginning with Goods and Services Tax, shift to Shared Mobility, Axle-load reforms, the Bharat Stage-IV (BS- IV) to Bharat Stage-VI (BS-VI) transition, Liquidity Crunch and so on. The COVID-19 lockdown has had a multiplier effect – the industry has almost been at a complete standstill since 24 March4 . A prolonged truncation of demand due to the lockdown may further dampen consumer sentiments and significantly affect auto OEM revenues and cash flows. In response, companies may resort to starving their RD funding in order to sustain core operations, and potentially set back the progress made on alternate fuel and mobility technologies by two to four quarters. Eventually, some companies may even choose to take a strategic call to exit unprofitable markets and vehicle segments. Based on our understanding of the industry, and supplemented by discussions with leading auto OEMs and ACMs, we believe that the Indian automotive industry is likely to witness a prolonged U-shaped recovery (Scenario 2), with a best-case recovery to FY19 sales volumes expected by FY22. Auto dealers have been unable to deliver vehicles during lockdown, and have reported 20-30 days of finished goods inventory5 , likely to be heavily discounted post lockdown. Further, with BS-VI sales mandated from 10 days after lockdown ends (and sale of only 10% of the existing BS-IV inventory in those 10 days)6 , dealers face significant burden to liquidate unsold BS-IV inventory, estimated to be worth ~INR
  • 12. 10 COVID-19 response for automotive companies 6,300 Crore7 . In this scenario, OEMs will need to support dealer groups, both financially and otherwise, further stressing their own balance sheets. Auto-suppliers have a high dependence on migrant labour, whose absenteeism is expected to further delay revival post lockdown, resulting in a domino effect on the entire value chain. Suppliers facing liquidity issues may succumb to deteriorating market conditions, causing widespread disruption across the entire manufacturing ecosystem. Larger players may look to acquire these struggling suppliers in order to realise operational synergies. Captive finance companies of OEMs are also expected to face the brunt, as the number of loan defaults are likely to go up, leading to high non-performing assets (NPAs). On the other hand, new customer loan disbursement is expected to go down significantly, as determining the credit worthiness of potential customers is likely to be a challenge. Both of these outcomes will hit the firms’ profitability and question the feasibility of continuing operations in these market conditions. Lastly, the prolonged lockdown will put tremendous strain on the operations of other smaller players (mobility solution providers, used-car players, and after-market service providers) whose funding depends heavily on aggressive revenue growth projections. Shared mobility players (ride sharing, car sharing, ride hailing) may have to rethink their offerings, as it is very likely that customers may end up preferring private modes of transportation that guarantee ‘social distancing’, at least in the short term. Figure 4. The 3-phase action plan for companies3 Respond Immediate (during the lockdown) 1-2 months* * May vary depending on lockdown duration Recover Mid-term (just post the lockdown) 3-8 months Reinvent Long-term (permanent changes) 9 months +
  • 13. 11 COVID-19 response for automotive companies Figure 5. Potential actions for auto companies3 Potential implications for the Indian automotive ecosystem It is apparent that stakeholders across the automotive ecosystem need to prepare and plan to rebound in a phased manner, while bracing for a long-term impact. While they may respond by taking some actions immediately, they must also consider preparing in advance to launch initiatives just after lockdown ends, and recover by capturing maximum value. In addition to these short-term actions, players also need to respond to permanent disruptions that this pandemic may have brought about (e.g. consumer behaviour, dependence on global networks), and prepare to reinvent their businesses with long-term interventions (Figure 4). We discuss some themes around which players need to act to enable themselves to be ‘battle-ready’ for their quest to revive the industry and their respective businesses (Figure 5). These themes are relevant to the prolonged U-shaped recovery that the auto industry is likely to undergo. Respond Engage with customers and the dealer network: Reduced engagement due to lockdown could affect both customer loyalty and the OEM-dealer connect • Help dealership teams upskill through refresher virtual trainings, online certifications and gamified solutions • Share relevant do-it-yourself videos on social media to engage with customers Manage the liquidity crunch in the system: Crunch of working capital due to tepid sales is likely to cripple the smooth functioning of the network • Provide financial support to dealers and suppliers (e.g., provide longer credit period, expedite incentives disbursal, fund capex, relieve interest burden for few weeks) • Introduce cost-cutting measures for non-essential activities/suspend discretionary spends to maintain liquidity Actively contribute to fighting the pandemic: OEMs will be expected to do whatever within their means to help raise awareness, provide infrastructure • Side-pocket existing production lines into producing products for healthcare (e.g., sanitizers, personal protective equipment) Respond Respond Reinvent Engage with customers and the dealer network Plan for spike in demand of personal mobility solutions Adopt hygiene-centric process and design changes Assess and de- risk supply chain dependencies Prioritize focus on employee safety and care Plan for shifting mobility preferences of the consumer Manage the liquidity crunch in the system Re-assess upcoming launches and financing offerings Capture opportunity to consolidate opportunity Prepare for an omnichannel sales experience Explore alternate revenue options Adopt digitalization of consumer touchpoints Actively contribute to fighting the pandemic Explore offerings around hyper-local delivery model Plan well for the post-COVID-19 situation Redesign manufacturing architecture and supply chain processes
  • 14. 12 COVID-19 response for automotive companies • Take initiative to support the affected – e.g., support for all unorganized/ contract workers in the automotive ecosystem Plan well for the post-COVID-19 situation: Opportunity for players to rethink their way ahead and develop appropriate strategies to navigate the post-crisis situation • Plan to efficiently manage the warranty and dealer claims, which are expected to surge, once lockdown ends • Design trigger-based contingency plans including, and in alignment with the entire network to manage working capital needs Recover Plan for spike in demand of personal mobility solutions (vis-à-vis shared solutions): Increased aversion to use shared mobility and public transport may result in a spike in demand for 2-wheelers, entry-level 4-wheelers and pre-owned vehicles immediately after lockdown • Increase focus on “Push” (targeted marketing) to identify prospects rather than relying on traditional “Pull” sources • Design special financing schemes for purchase of vehicles to help customers tide over liquidity crunch Assess and de-risk supply chain dependencies: High dependency on global auto parts (esp. from China) led to bottlenecks in the supply chain long before the pandemic actually hit India • Plan for short-term demand skew for spare parts; undertake risk assessment of supply chain (suppliers, logistics etc.) • Use analytics to better monitor the supply-demand gap and design short-term response strategies accordingly Re-assess upcoming launches and financing offerings: Reduced discretionary spends may push customers to shift to lower-priced segments and variants • Re-assess launch timelines to prioritize products in the lower-price segments to avoid loss of market share • Redesign loyalty programs to demonstrate and retain lifetime value, and overcome the drop in premium purchases Prepare for an omnichannel sales experience: Even after the lockdown, customers may not want to visit crowded dealerships or interact with the sales staff in person • Explore the concept of virtual sales consultants, and remote demonstration of vehicles • Explore the feasibility, capabilities and partnerships required in setting up an integrated online-offline sales channel Adopt hygiene-centric process and design changes: The consumer expectation of hygiene, sanitization standards are expected to be more than the current standards maintained by dealers • Include sanitization/fumigation as part of workshop services, test-drive, etc. • Identify innovative solutions to design “No-Contact” customer journeys and transactions Prioritize focus on employee safety and care: Healthy, engaged and committed employees are likely to be the most essential resource for any player looking to stage a swift recovery • Redesign safety norms in offices and plants to ensure robust medical security systems and adequate health training for all • Deploy flexible employment systems to ensure a healthy working environment – both medically and mentally Capture opportunity to consolidate operations: High financial strain on smaller players to operate in low-sales period may force them to close/ sell the business • Evaluate synergies and look at potential alliances/ partnerships/acquisitions • Explore new sources of funding such as private equity for highly stressed dealers and service providers Explore alternate revenue options: Financial pressures due to loss of business and high fixed costs will require new sources of income to recover the losses incurred • Focus on allied product and services like accessories, value added services in workshop, concierge services, etc. • Re-prioritize existing strategic projects and advance their timelines Reinvent Plan for shifting mobility preferences of the consumer: Long-term impact on the growing trends for premiumisation, shared mobility, OEM-fleet partnerships; growing preference for low-touch sales and service experiences, new ownership models that are cash-flow friendly • Review current alliances with cab service providers; focus on new alliances that are expected to gain importance in future such as leased vehicles, corporate tie-ups etc. Adopt digitalisation of consumer touchpoints to supplement physical sales: The trend of e-commerce platforms for end-to-end online car purchase is likely to find more acceptance among Indian customers, given higher convenience • Set up partnerships with dealerships, financial service and e-commerce players to design a completely digitalised
  • 15. 13 COVID-19 response for automotive companies customer journey for sales and service; helps decongests physical outlets and allows seamless delivery in areas with low dealership penetration Explore offerings around hyper-local delivery model: Increased preference of customers to avoid crowded marketplaces, and prefer no-contact transactions • Align product and customer strategies (e.g. e-bikes for last mile delivery) with the upcoming trends in home delivery • Offer alternate asset ownership models to e-commerce players to reduce the financial burden of high upfront capex Redesign manufacturing architecture and supply chain processes: The financial impact of a high fixed-cost model and an import-reliant supply chain has been severely felt by all players • Accelerate the indigenisation of auto components to increase self-sufficiency and minimize risk of supply chain breakdowns • Adopt new business models that shift costs from fixed to variable nature, thereby reducing the breakeven volume • Invest in developing early warning systems/ downturn planning to be able to respond faster in similar future scenarios – agility-driven forecasting The themes and the illustrative responses mentioned are expected to help auto companies prepare for an expected U-shaped recovery. It is essential to note that this expectation is built on the prevailing condition of the auto industry, and the understanding of the pandemic’s likely spread, the time it takes for containment, and the impact of these events specifically on the auto industry. However, the behaviour of the virus in reality (development of more robust strains vs. development of a vaccine) and the time it takes to contain the spread (2 quarters vs. 4+ quarters) are factors that are difficult to predict with certainty. It is therefore likely, that the auto sector may head towards an even more prolonged W-shaped recovery instead, wherein a second bout of the pandemic follows the initial remission. Companies must look to identify the onset of such a scenario by tracking and observing certain indicators, so that they are well prepared to respond to the second wave and minimize both, financial losses and the ensuing structural damage to the value chain. Some of the indicators that may point towards such a possibility are • Reversal in the decreasing trend or a continuous increase in the number of infected cases • Increase in number of infection ‘hotspots’ • Reinforcement/ continuation of lockdown norms, especially in large cities, etc. • Reports of recurrent waves in other economies • Delay in the development of a vaccine • Discovery of alternate strains of the virus Persistence of these indicators can be a clear sign for auto companies to prepare themselves. While the initiatives discussed across respond, recover and reinvent for the U-shaped recovery remain valid even in this scenario, companies should prioritize to secure their supply chains and develop trigger-based micro work-plans in partnership with the network to ensure adequate working capital to weather the next storm.
  • 16. 14 COVID-19 response for automotive companies References 1. ‘Coronavirus: Half of humanity now on lockdown as 90 countries call for confinement’, Euronews, 3rd April, 2020, https://www. euronews.com/2020/04/02/coronavirus-in-europe-spain-s-death-toll-hits-10-000-after-record-950-new-deaths-in-24-hou 2. COVID-19 Strategic Response Lab, Centre for the long view, Monitor Deloitte 3. Deloitte India analysis 4,5. ’Auto dealers fear they will not be able to liquidate BS-IV stock before March 31 deadline: FADA’, The Economic Times, 9th March, 2020, https://economictimes.indiatimes.com/industry/auto/auto-news/auto-dealers-fear-they-will-not-be-able- to-liquidate-bs-iv-stock-before-march-31-deadline-fada/articleshow/74552112.cms?utm_source=contentofinterestutm_ medium=textutm_campaign=cppst 6. ’Two-wheeler makers’ huge BS-IV inventory will not go away post lockdown’, The Hindu Business Line, 3rd April, 2020, https://www.thehindubusinessline.com/news/two-wheeler-makers-huge-bs-iv-inventory-will-not-go-away-post-lockdown/ article31246258.ece 7. ‘Lockdown leaves India's car dealers with the battle of their lives’, Economic Times, 26th March, 2020, https://m.economictimes. com/industry/auto/auto-news/lockdown-leaves-indias-car-dealers-with-the-battle-of-their-lives/articleshow/74810838.cms
  • 17. 15 COVID-19 response for automotive companies Contact Us Acknowledgements Rajeev Singh Partner, Consulting and Deloitte India Automotive Sector Lead Deloitte Touche Tohmatsu India LLP Phone +91 124 679 2927 E-mail: rpsingh@deloitte.com Harsh Kapoor Partner, Consulting Deloitte Touche Tohmatsu India LLP Phone +91 124 679 2876 E-mail: harshkapoor@deloitte.com Atul Jairaj Associate Director, Consulting Deloitte Touche Tohmatsu India LLP Phone +91 22 6122 8000 E-mail: ajairaj@deloitte.com Suhen Singhal Manager, Consulting Ronak Nagori Senior Consultant, Consulting Rajat Mahajan Partner, Consulting Deloitte Touche Tohmatsu India LLP Phone +91 22 6245 1270 E-mail: rajatm@deloitte.com Sheekher Saran Associate Director, Consulting Deloitte Touche Tohmatsu India LLP Phone +91 22 6122 8497 E-mail: shesaran@deloitte.com Anand Pareek Manager, Consulting Vignesh Iyer Senior Consultant, Consulting
  • 18. 16 COVID-19 response for automotive companies
  • 19. 17 COVID-19 response for automotive companies
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