NEW DELHI: Disruption in supply chain caused by the three-week lockdown can prove to be a major roadblock in the revival of the auto component industry, already hit by a financial crisis.
“The situation remains very fluid. The lockdown has disrupted the entire supply chain ecosystem nationally and internationally, which in turn will make recovery difficult,” said Vinnie Mehta, director general, ACMA.
“Firstly, we are unsure whether the labour force will come back to the plants. Secondly, components being non-essential items, their production is expected to commence only in a phased manner,” Mehta said.
According to ACMA, the component industry is losing Rs 1,000-1,200 crore in revenue per day because of the production shutdown. The sector may face additional challenges with many Tier II and III suppliers looking at possible bankruptcy if their working capital requirements are not met by financial institutions.
Meanwhile, rating agency ICRA on Friday said the Covid-19-induced supply chain disruptions will manifest into a demand shock lasting multiple quarters for the domestic component industry.
The component industry has been facing disruption in supply chain since the coronavirus outbreak halted operations in China’s Hubei province.