The capacity
utilisation of the majority of the auto sector MSMEs has started falling since
mid-April 2021 due to cash inflow disruption, lack of orders, and labour
shortage. MSMEs are entirely dependent on regular cash inflow, unlike tier-I
component makers and OEMs. They do not have enough cash reserves to bear
continuous work suspension. Most of the MSMEs are undergoing struggles to make
salary payments and run their daily basic operations, as per industry insiders.

According to an
industry expert, nearly 50% of MSMEs in the top clusters of
Delhi-Gurugram-Faridabad, Ludhiana-Jalandhar, Mumbai-Pune, Jamshedpur-Kolkata,
Chennai, Pithampur, and Sanand have seen a 20%-50% impact on their earnings.
They do not have enough capital for bill and wage payments.

MSMEs comprise more
than 85% of the component industry in India. A majority of them are Tier-II and
Tier-III players that supply sub-assemblies and parts to Tier-I players, OEMs,
and the replacement market. They are now among the hardest hit sectors due to
the economic downturn caused by the pandemic. The OEM level supply chain
disruption is leading to a ripple effect as orders from the suppliers have
slowed down.

OEMs have closed their
plants and reduced the requirements because of infection concerns and the
regional lockdowns. As per Piyush Tamboli, CMD, Investment Precisions and
Castings in Bhavnagar, a minimum of 50% of their work orders have dried up.
Tamboli also added that oxygen diversion from the industrial units also
aggravated the downside risk for this sector.

A senior spokesperson
of Chakan Industries Association added that in addition to rising cases and
restrictions across states, worker’s migration is on the rise and this is
leading to fresh problems for the parts and components suppliers. Retaining
willing workers and recruiting new ones is also costing more money due to the
COVID protocols.

Source – ET Auto

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Also Read:

https://www.automotiveproductsfinder.com/news/auto-sales-in-india-down-30–in-april-2021-due-to-state-lockdowns–siam/134511

https://www.automotiveproductsfinder.com/news/covid-impacted-small-auto-component-suppliers-heavily–ey-report/134434

https://www.automotiveproductsfinder.com/news/second-covid-wave–lockdowns-impact-india-s-april-auto-sales–says-centrum/134473