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Omicron may jam auto industry

Full recovery expected only in 2023

With WFH continuing, chips for electronic industry will continue to dampen auto sector

MUMBAI, Dec 28 (The CONNECT) - The auto industry, which has been in a reverse gear, apprehends a bumpy ride in the new year with the Omicron impact threatening yet another economic slowdown.

Vinkesh Gulati President FADA (Federation of Auto Dealers Associations) said, “We see year 2022 as a neutral year as the rise of Omicron has once again created fear globally. This may further impact the supply in passenger vehicles if chip making countries go under lockdown or prioritise chip making for electronics used for ‘work from home’.

The 2-wheeler market which continues to face demand headwinds may further go in slump if 3rd wave becomes a reality, he said.

“We anticipate that H2 of CY 2022 may see supply as well as demand slowly coming back to normalcy. As mentioned earlier, Auto Industry may fully recover only by 2023 and come back to its pre-covid levels if covid becomes a history.”

Vikas Bajaj, President, AIFI (Association of Indian Forging Industry) said, “After the second wave, the industry is still facing challenges. The Indian forging industry is currently going through a difficult phase. The sector is always confronted with new challenges. The industry is largely concerned about the lack of semiconductor chips, which has also had an impact on exports. In addition, the increase in steel prices has harmed the Indian forging industry. It is the most important requirement in the forging sector and the current price increase has disrupted the supply chain, he said.

The advent of Electric Vehicles will also have a direct impact on the forging sector, as it will reduce demand for moveable parts used in vehicles, resulting in significant unutilized forging capacity. However, the industry continues to support our government's green initiatives. Furthermore, we are optimistic about 2022, anticipating that the semiconductor shortage would be resolved by the second or third quarter of 2022. On the new Omicron variant, I believe it will be existing, and such variants will continue to emerge; we will have to live with it and seek to keep our employees safe by adhering to all health and safety regulations,” Bajaj said.

Ashwath Ram, Managing Director, Cummins India Limited said “2021 started positively with signs of visible business growth trends after Wave 1 of the Covid 19 pandemic. Wave 2 from April to June caused massive devastation resulting in constrained economic activity and severe loss of lives. The second half of the year came in as a ray of hope with the gradual recovery and stabilization of the business environment. Cummins is well-positioned for growth as economic activity gains momentum, and we continue to witness strong demand for our products and services. This rising demand is encouraging; however, significant constraints in the global supply chain continue to pose challenges for our business and our customers. These constraints have resulted in rising material costs, high logistics expenses, and other manufacturing inefficiencies. We met these challenges successfully driven by the agility of our employees, great product launches, the faith of our customers, and the support extended by our suppliers. As we march into 2022, our priority continues to be the safety and well-being of our people, powering our customers and communities, focusing on improving margins, and ensuring our company's continuity in the future.

Ram explained, from an industry perspective, 2021 has been a challenging year. The uncertain turn of events due to Wave 2 of the pandemic resulted in significant disruptions in the global supply chain, leading to an extended period of shutdowns, material and labor shortages, and higher costs beyond forecasted expectations. With economic revival happening gradually and strong support from the Government of India for driving manufacturing growth through initiatives such as: Make in India and Atmanirbhar Bharat, PLI scheme, increase in FDI, push for developing industrial corridors and smart cities, we are hopeful that 2022 will witness a strong revival and upward trend in business performance.

For Cummins India, 2021 was a year of agile strength and consolidation, he said. “While 2020 taught us all to be resilient, 2021 was a further step up in navigating through disruptions and ambiguity and demonstrating agile strength. We learned that the best thing to do to respond to a crisis even when the path ahead does not appear very clearly is to continue moving with purpose and determination. It also made us realize that the shift in working is not transient but here to stay. Flexibility at work can be individualized for each person and their needs while also meeting the needs of our business to achieve successful outcomes.

“As 2021 comes to an end, we continue to work safely and effectively through this challenging period with strength and cautious optimism. Our focus is on meeting our commitments to customers who provide products and services critical for the functioning of the Indian and global economy. We are quite hopeful of sustained improvement and economic recovery across industries and segments from an outlook perspective. However, with the rising Omicron Variant cases, the threat of future waves, and forecasted supply chain disruptions, it is difficult to give a steady or stable outlook for 2022,” Ram added.

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