Coronavirus impact: Hero MotoCorp says production to suffer by 10% in February

India's largest two wheeler maker Hero MotoCorp on Friday said the Coronavirus outbreak in China is likely to impact its planned production for the month of February by 10 percent since supplies of some components to its manufacturing facilities in India have taken a hit.

The company has a combined production capacity of 9 million units per annum and five manufacturing facilities in India located at Dharuhera and Gurgaon in Haryana, Haridwar in Uttarakhand, Halol in Gujarat and Neemrana in Rajasthan. A sixth facility is under construction in Chittoor in Andhra Pradesh.  

"The ongoing issue of Coronavirus (Covid-19) in China has affected the supply of some components to our manufacturing facilities in India. This is likely to impact our planned production by around 10% for the month of February," the company said in a statement. "However, the wholesale dispatches of our vehicles to the dealers during the month remain unaffected. Any further impact on our production will depend on the developing situation in China. We continue to track the developments and keep evaluating our options."

Hero is the second major automotive player in India to confirm that the virus has impacted its operations. Last week, domestic utility vehicle major Mahindra and Mahindra had also said production of around 3000-3500 units of its BS IV emission vehicles maybe impacted if supplies from China do not resume soon.

"We have one or two parts that are procured from China for our BS IV vehicles. These parts are now (coming in and are) in the quarantine process," said Pawan Goenka, managing director, M&M. "I am hoping that it (supply) will open up in next week to 10 days and there won't be any impact. But if it goes beyond that then we will have a challenge of 3,000 - 3,500 BS IV vehicles for which other parts are already in our inventory."

Another company that has confirmed an impact to its operations is MG Motor that makes the mid size SUV Hector in India and is owned by China's biggest automotive group SAIC. The company has said its sales in February will suffer due to the virus outbreak and resultant shutdown in China.

"We expect significant disruption in the supply chain from European and Chinese/Asian suppliers" says Gaurav Gupta, chief commercial officer, MG Motor India. "Our sales will get impacted in February due to the coronavirus as our inventory levels have been minimum because of the bookings backlog. We are working towards ensuring that the impact on the end-consumer and our operations is minimised."

The domestic automobile industry is one of the prominent sectors likely to be hit by the disruption due to the outbreak of Coronavirus in China, which is not only world's largest automobile market but also deeply embedded in the global supply chain for automobiles. Though India has its own fledgling component industry, it is still not completely insulated from China. Infact, import of components from there have been on the rise. In fiscal 2019, India imported components worth $4.6 billion from China which accounted for more than a quarter of overall component imports into the country. In the first six months of the current fiscal as well, imports from China were worth $2 billion.

"There is not a single country in the world that actually produces everything. It's the same with automotive industry as well. You know we are rather weak as far as electronics are concerned. So depending on the product there's always a piece of China in. So, coronavirus might have an impact," says Guenter Butschek, managing director and CEO, Tata Motors. "The lunar Lunar New Year holidays, casually called Chinese New Year holidays have been extended by one week and we all expect people to get back to back to work at the beginning of the next week. So we need another reference check to see what has been produced, what has been shipped, what is available for shipment, and then to do the math to see where we are against our production plan. This is currently an operational concern and we will discover it as our regular contacts get back at work. I do hope it's not a threat but it's at least at this point of time uncertain."

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