As the government eases conditions on the coronavirus blockade, factories begin to silence themselves with moderate demand.

Mumbai Kolkata: Indian factories will start quietly as the government eases security shutdown conditions partially from May 4 and manufacturing appears to be back to normal as many plants have been closed for more than a month .

Automakers will begin production this month with production at about a quarter of the usual level. The main manufacturers of smartphones, electronic products, clothing and footwear expect to restart with a capacity of 15-20%, although not immediately. They expect a big dent in consumer demand, given wage cuts and job losses due to the blockade that had been imposed since March 25 to curb the spread of Covid-19. Industry executives said most plants will operate at low capacity at least until the holiday season.

Manufacturers will have to deal with the limitations of the country that is divided into red, orange and green zones, in addition to the containment areas that are completely sealed. The situation is fluid and the zones can change according to the cases. They also have to make sure that vendors’ supplies can be transported to plants seamlessly and put enough distance between workers.

Most automakers have told their supply chains to prepare for production at 20-30% of capacity, after zero production in April. Maruti Suzuki, Hyundai Motor, Honda, Mahindra & Mahindra, Tata Motors and Toyota Kirloskar Motor (TKM) will try to resume in the first half of May, while major exporters Ford and Volkswagen will start manufacturing in the second half of the month, according to people. with knowledge of the subject.

A lot will depend on opening markets as well, said Naveen Soni, senior vice president of sales and service, TKM, as dealerships also have to be resumed for sales to take place.

Most automatic costs to run a shift

“In addition, the areas where our suppliers reside are also dynamic. We want to start manufacturing in May, but much will depend on the authorizations of our final supplier and the opening of the market. There is no point in producing if the buyer is not there, ”he said.

Most will run one shift and have physical distance in the workshop. Workers have already gone to the plants to begin preparing for production. MG Motor has already started manufacturing a small number of vehicles at its Halol plant in Gujarat. Mahindra and Mahindra will start their engine and transmission unit at Chakan in Pune starting Monday.

India is expected to make 50,000 to 70,000 cars in May, given the fact that the first few days will go to disinfection and rearrange the floor of the assembly, said Gaurav Vangaal, associate director of IHS Markit.

“The entire automotive ecosystem is paralyzed and its locally administered bandwidth is already overloaded to give factory clearances,” he said. “We expect production to increase slowly to 10-20% in the first week, before moving to 30-50% in the next two weeks.”

The Maruti Suzuki plants at Manesar in Haryana and Gujarat will be the first to resume production and the Gurgaon factory will start later.

Logistics and supply chain challenges will need to be overcome as over 90% of vendors are in the red zone. For example, the Vitara Brezza molding comes from a plant in Noida in Uttar Pradesh, while the rubber mix used in it comes from Mohali in Punjab. The mixture is not stored as its properties change after 20-25 days if not used.

Maruti Suzuki President RC Bhargava recently told ET that the company will start operating only when it can do so sustainably. Automakers have supply chain partners spread across the country, and inadequate access to components will delay production processes even if automakers reopen. Also, unless dealerships are resumed, stocks will continue to accumulate above inventory already in the channel.


CONSUMER ELECTRONICS

Large multinational companies such as LG, Vivo, Oppo and Realme had not yet received the green light for the resumption of production by local authorities as of Sunday night, as their plants fall in the most affected areas.

Most plants are expected to operate at low capacity until the holiday season. Several mobile phone manufacturers export from India and part of the production can satisfy that initially. Samsung has also not received approval to start production and the company has yet to decide when to resume. Panasonic, Woodland and others said they would restart only when there is demand.

Samsung, LG, Vivo and Oppo did not respond to inquiries.

The president of the Association of Home Appliance and Home Appliance Manufacturers (CEAMA), Kamal Nandi, said that production at the industry level cannot exceed 20-25% in the coming months.

“Categories like air conditioning and refrigerators will lose 30% of their annual sales due to the closure,” said Nandi, who is also the chief commercial officer for Godrej Appliances. “Demand in cities and big markets will be subdued to the poor … sentiments are likely to continue even during the holidays, and the only hope is if the country is revived with a good harvest of crops and a normal monsoon.”

SMARTPHONE

CEO of Realme India, smartphone maker Madhav Sheth, said that once sales resume, demand will definitely be affected due to lost revenue, a possible recession and increased goods and services tax (GST) on devices to 18% from 12% since April, forcing all brands to raise prices

“More consumers may postpone their plan to buy a smartphone for some time. We will understand market demand once online and offline sales resume, and accordingly we will make adjustments to our production plans, ”said Sheth.

IDC India Research Director Navkendar Singh said the smartphone market has been growing for the past two to three years as consumers upgrade.

“Consumers will keep their existing phones. The market will contract 5-6% this year and if holiday sales fail it may even be 10%, ”he said. The industry expects consumers to also opt for cheaper phones than flagship models.

Woodland India MD Harkirat Singh said it will reopen some factories after a few weeks and will have 10-15% capacity to prepare for the fall-winter season, anticipating low sales at its 600 stores. “We also have to save cash,” he said.

Puma India medical doctor Abhishek Ganguly hopes that sportswear will not be severely affected as he cares for work from home and sports attire, but the company has cut supplies.

“We want to keep the factory lights on since restarting production after a full shutdown for a while could be a challenge to increase when demand revives,” he said.

In addition to low anticipated demand, the companies said it will be difficult to increase production as they have to follow distance rules in factories and buses.

(With contributions from Sharmistha Mukherjee)