In order to limit the congregation of people automotive manufacturers in China have curb production.
On Wednesday Fitch said it anticipate that due to China’s coronavirus epidemic , vehicle production in India will contract by 8.3 % in 2020 as the auto industry faces growing risk of supply shortage possibly hitting domestic output if the virus spreads in the country.
Automotive manufacturers in China have terminated production in order to restrict the congregation of people and decrease the exposure of its population to possible infection a“we see India adopting similar policies if the virus spreads throughout the country,” Fitch said. Regarding India’s health care system which is unfit to deal with a large scale epidemic the rating agency said, “ The impact on Indian autos will be much bigger because the virus will spread rapidly in the country when compared to China.”
China is one of India’s largest suppliers of automotive components, a slowdown in the supply of China-made components will lead to shortages in India and could force auto makers to speed down or stop production. As a result, Fitch forecasted that following an estimated contraction of 13.2 % in 2019, vehicle production in India will contract by 8.3 % for 2020.
The agency added that it believes that the uncertain domestic demand for new vehicles will see India’s vehicle production continue to decrease in 2020. China provides India with its automotive components which range between 10-30 % and this could be 2 to 3 times higher while looking at India’s EV segment which highlights how exposed India’s automotive manufacturing industry is to the slowdown of vehicle Chinese component manufacturing,”.
Fitch also believes that the protectionist policies presented in the country’s 2020 Budget with regards to electric vehicles will provide some upside potential for local EV production, but it will be followed by increased trade risk.