Economic impact of #ChennaiFloods: auto industry to be worst hit
- Chennai accounts for 25% of India\'s automotive production - of cars, bikes and parts
- The auto industry contributes more than 40% to the country\'s manufacturing sector
- India exported 3.5 million vehicles in 2014-15. This is set to fall drastically due to the Chennai floods
- Even for domestic consumers, the delivery periods will get longer and service will also suffer
More in the story
- Which auto companies will be worst affected?
- What are the financial implications of the floods on the industry?
The tragic impact of the floods on daily wagers, small businesses and the unorganised sector is harder to compute.
Chennai accounts for 25% of India's $38 billion per annum production.
What's more, the auto industry contributes more than 40% to India's manufacturing sector, so the Chennai floods could have a big impact on the national economy.
Drop in production, longer waiting period
In terms of sheer numbers, India exported a record 3.5 million vehicles in 2014-15. The figure was a rise of 15% from the previous year.
For example, if you were expecting the delivery of a Royal Enfield motorcycle on New Year's Eve, that's no longer an option.
Chennai accounts for 25% of India's automotive production. Each day lost means a loss of Rs 180 cr
The company, which sells over 40,000 bikes a month, had to forgo the production of 4,000 units in November.In December, it has been unable to produce a single unit in the first seven days.
Royal Enfield's top seller, the Classic 350, has a waiting period of 2-4 months when the Chennai plant is at full throttle. One can easily expect that to go up by more than a month.
"We have not been able to assess what would be the delay in the delivery of motorcycles for our customers. But it would be more than the usual wait. Our plant in Chennai is shut since 1 December," said a Royal Enfield spokesperson.
Companies who'll suffer the most
Apart from Royal Enfield, the other companies to be impacted are Ford, Hyundai, Renault Nissan, Daimler India (Mercedes Benz) and Mahindra & Mahindra.These companies either have production facilities in Chennai or sourcing vendors.
Renault dealers in Delhi have started informing their customers to be prepared for a longer waiting period.India's second-largest car maker, Hyundai, is reportedly losing production of about 1,800 vehicles per day. The company has two plants in Chennai, with an annual capacity of 6.8 lakh cars.
It's not only car buyers who'll face a problem. Company-owned service centres, too, are facing a problem in providing original auto parts to their customers.
An official of a South Delhi-based Ford service centre told Catch: "Naturally nobody is taking calls in Chennai. We are facing a shortage of spare parts. We are managing with old stock, but certain parts are not available. In the coming days, it would become very difficult to service cars."
The financial impact
While no company is willing to discuss on record how big an impact the floods will have on their balance sheets, they privately admit that it would be significant.Abdul Majeed, auto expert at PricewaterhouseCoopers, says: "Chennai is a huge supply hub for all the major original equipment manufacturers. So, even if a company does not have its plant in Chennai, it would be sourcing something or the other from a Chennai-based vendor. This will also impact the export of automobiles from India."
According to a senior executive in an automobile company, the real impact of the Chennai floods will be seen for months, as many of the equipment in the plants was damaged in the floods.
"While the equipment can be repaired, it might not allow us to meet our peak production capacity anytime soon," said the executive.
More in Catch: