Watched a very interesting webinar today, organised by ET Auto. The topic was on the impact of Covid 19 on the global auto industry. Found the session by Dr. Wilfried Aulbur of Roland Berger insightful and interesting to share here.
KEY TAKEAWAYS – GLOBAL :
# the intensity of global disruption depends on when and how long different regions take to contain the disease.
# Pre-Covid Global GDP forecasted growth for this fiscal was 3.3%. Assuming a scenario of 4 weeks global disruption growth, there would still be growth but at a lower 2%. If the disruption were to extend to 12 weeks, global GDP would reduce by 1.2%
# the auto sector was already distressed pre-covid and is now at high risk from both supply and demand factors
# 3 scenarios were laid out :
FAST RECOVERY
a V shaped time graph (unlikely given the spread of the pandemic). this sees a quick ramp-up in q2 of 2020 itself
DELAYED RECOVERY
a U shaped time graph. This is the best case outcome given the facts at the moment. This sees a ramp up only by Q4 of 2020 and recovery in FY2021
PROFOUND RECESSION
a L shaped time graph. No ramp up possible in 2020. Recovery in 2021 also takes time as the heavily linked global supply chain for auto and demand related factors take time to stablise.
As far as the Indian Auto market is concerned, the situation was already weak pre-Covid as well due to :
– private consumption and savings as a % of GDP have declined
– rural demand yet to pick up, credit shortage from NBFCs, infra constraints in urban areas, BS6 implementation
– Covid outbreak worsened this further with a severe impact on Q4 sales
Indian auto market is hence expected to take longer to recover – sales likely to drop by anywhere from 5% to 21% under the ‘U’ and ‘L’ time graph scenarios.
The webinar concluded with 6 key areas that need to be addressed to ensure resilience in this difficult period :
For those who have the time, here is the full video from the webinar
