The Indian automobile industry, already dented by a protracted downturn before the Covid-19 pandemic, is in for an even more severe and prolonged disruption, as the global situation and domestic lockdown snaps major links of its supply chain.

Currently, India sources 80-85% of components for all vehicle segments domestically, mainly from the National Capital Region (NCR; including Gurgaon, Manesar, Faridabad and Greater Noida), Pune (including Chakan, Talegaon and Ranjangaon), Mysuru and Sriperumbudur and Hosur clusters. The rest is imported.

CRISIL Research mapped the disruption using the two bases of domestic supply chain and imports. The findings:

• Within the domestic supply chain, passenger vehicles (PVs), two-wheelers (2Ws) are highly dependent on the Delhi-NCR and Maharashtra clusters. Hence, prolonged lockdown in these geographies would hurt the supply of components and auto manufacturers operating in these vehicle segments the most
  
• Component risk for products such as cast engine parts and transmission drives would also increase, as major capacities are located in these two clusters
  
• Commercial vehicle (CV) manufacturers may be less affected as they source from across clusters
  
• Tractors, which have medium to high dependence on Delhi-NCR and Tamil Nadu, also face supply risk
  
• India is dependent on Chinese imports for critical components such as electronic control chips, engine control units & sensors. If logistics between the two countries remains disrupted for longer, it may translate to higher procurement costs (because of the need to airlift components)
  
• Imports of engine and transmission components from the United States (US) and Germany are likely to be adversely impacted if manufacturing in these regions take time to bounce back
  
• Congestion at ports because of slow clearance of goods owing to labour shortage, and no significant uptake in exports will lead to an increase in shipping freight rates and higher turnaround times via road