Till about a couple of months ago, Rajeev Chaba, President and Managing Director of MG Motor India, had reasons to be worried about sourcing components from China, which was then the boiling point for Covid-19.

Now his bigger concern is Europe, and in particular Italy, which is one of the key supply points for his company’s operations in India. “A lot of my diesel engine components come from Fiat Chrysler Automobiles (FCA), which is closed since Italy is also closed,” Chaba said in a telephone interview with BusinessLine .

The Fiat 2.0 litre diesel engine is used for the MG Hector SUV, and takes up a substantial chunk of its sales. “We take the powertrain from FCA India locally in Pune which, in turn, imports a lot of engine components from Turin, Italy,” he added.

Closure effects

Italy has been among the worst ravaged countries in Europe along with Spain, and this has had its fallout on sourcing for the automobile industry. FCA is a case in point, where its Turin plant closure has had an effect on global sourcing.

“More than the powertrain, there are other components from Europe which are assembled in China and then come to us here in India,” elaborates Chaba.

MG Motor India, a subsidiary of China-based SAIC Motor Corp with its plant in Gujarat, depends heavily on the Pune belt for its sourcing needs.

This puts in perspective why the Pune closure announced by the State government forced the company to “start thinking of closing” its Halol operations in Gujarat. This was even before the mega three-week nationwide lockdown came into effect 10 days ago.

Pune has many auto ancillary suppliers present in the Chakan-Ranjangaon belt, and is one of the key hubs in the country along with Chennai and Gurugram. “The big concern for us is that the Pune hub is closed, which means that the problem then becomes largely India and Europe. If Europe were to continue its closure for 2-3 months longer, we will be in serious trouble,” warns Chaba.

Supply chain

This is ironically happening at a time when the starting point for Covid-19, China, is limping back to normalcy. The million-dollar question, therefore, is to check when the lockouts in Europe and India are lifted so that this is in sync with China’s ability at this point in time to gear up for more shipments. For now, nothing can be said, with Covid-19 bringing in more bad news by the hour.

The silver lining in the cloud, said Chaba, is that MG Motor’s supply chain position for its diesel engines in India has “improved for the next 2-3 months compared to February”. The downside, however, is that if there is no sign of the lockdown being lifted in Europe, where factories are not able to reopen even partially, then “we will truly be in a big soup”.

Simply put, this means that the present pipeline of diesel engines can keep customer needs satiated till end-June (assuming that the lockdown in India is lifted in mid-April as planned). However, if Europe continues to be in a state of paralysis, there is trouble ahead for MG Motor’s diesel powertrains requirements. If the worst case scenario does emerge, the company will then have to pull out all stops to push its petrol versions aggressively.

In the midst of all this tumult and volatility, Chaba believes that there will be a “profound change” in India’s mobility arena once this pandemic eventually runs out of steam. “I would like to argue that post-Covid, more and more people will prefer private ownership of cars for some time till the bad memories go away,” he said.

For the next 2-3 years, people will “not be ready to sit” in an Uber or Ola because of issues relating to cleanliness and private space. After all, the hangover of social distancing is bound to have an impact in the near future across the Indian ecosystem.

Additionally, the other indirect benefit of Covid-19 has been clearer skies and better air quality. “I do think that going forward, there will be a greater push towards new energy/electric vehicles with all stakeholders going in for cleaner options,” said Chaba.

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