Despite slowing demand and softening raw material prices due to COVID-19, 35% of respondents reported higher electronic component prices due to supply disruptions in China.

NEW DELHI: Supply chain impact due to coronavirus pandemic will have a negative impact on the Indian auto component industry, ICRA rating agency said on Friday. The COVID-19 supply chain disruption will have a multi-quarter demand impact on the domestic industry, ICRA said in a statement.

The credit rating agency said it has conducted extensive research with major auto component importers and exporters to understand the impact of the epidemic on the global auto component supply chain and expects a significant decline in exports over the next two quarters.

“While most respondents believe that India will benefit when global original equipment manufacturers (OEMs) India, there are concerns about competition from other countries to remove geographic risk from the supply chain. Salt. This country will make that difficult,” he said.

Export-oriented companies are expected to build up inventories and increase receivables in the coming months in view of the global economic downturn, the report added.

Commenting on the situation, Pavethra “Ponniah, Vice President and Divisional Head, ICRA, said, “COVID-19 has so far disrupted the complex global auto component supply chain and short-term automotive demand, which could have a sustained demand impact on the domestic automotive sector. “He said. Industry. Several quarters.

Replacement demand will rebound, but demand for parts exports is expected to adjust sharply in 2020-21 as system inventories are replenished after the shutdown.

Ponniah “Apart from the global slowdown, the closure of large OEM plants in the US and Europe will also impact demand in India.”

ICRA said that more than 70% of ICRA’s channel surveys found that respondents have experienced or are likely to face COVID-19 supply chain disruptions. 35% of respondents said they would have no other source of raw materials if the supply chain in China, primarily electronics, were disrupted.

Globally, 47% of respondents who claimed to have an alternative source indicated that obtaining OEMs takes more than three months to approve and requires significant restructuring costs and validation time/costs.

Despite the slowdown in demand and drop in commodity prices due to COVID-19, 35% of the sample indicated that electronic component prices increased due to supply disruptions in China.

Ponniah “While the threat from China has begun to decline after peaking in 2020,” he said Year 2 this month, the risk from the big cogs in the global supply chain (the U.S. and Europe) will impact the industry in the first quarter of fiscal 2021.” .’

On the positive side, December 31, 2019 The first COVID-19 appeared Chinese patients have resumed operations across the country, and recently, the Hubei Provincial Virus Center (automotive parts industry) has 7 Home companies and 13 Large automotive companies have resumed operations. Parts and components companies have resumed operations. more than 10 electronics companies.

The ICRA survey found that while factories have reopened at about 60% capacity, there are still some absences. However, inter-and intra-provincial freight and port cargo is considered a hurdle for exports to China. Poonia added.

Considering that China is the fourth-largest exporter of auto parts, ICRA said the stringent shutdowns and province-wide closures imposed by China in January and February 20 disrupted the global supply chain. While China is trying to normalize, the global spread of new Crown Pneumonia (COVID-19), mainly in the US and Europe, is causing new disruptions.