SAIC-owned MG Motor India expects to restore normalcy in production by the end of next month, as supplies from China — which were disrupted because of the COVID-19 outbreak — have started picking up at a fast pace, said Rajeev Chaba, president and MD at MG Motor India.
“China is coming back with speed, our production in March has improved and April will be much better. By the end of this month, we will have 75 per cent of normal production, and by April, more than 100 per cent of normal production,” said Chaba.
He, however, added that supplies from other parts of the world, including Europe, from where the company sources diesel engine parts, remain a concern. The maker of the Hector SUV, which procures close to 30 per cent of its parts from China and elsewhere in value terms, has been the worst affected because of the supply chain breakdown. The company saw its production fall from 3,000 plus units in January to 1,300 plus units in February.
MG has a backlog of 17,000 units to deliver, and a few thousand buyers have been waiting since July, said Chaba, adding that despite the long wait, the company hasn’t seen many cancellations. The fresh bookings have been compensating them. Since it entered the Indian market in July 2019, MG has got more than 52,000 bookings. Of this, only a fourth have been cancelled, he added. The economic impact of the current crisis could weigh on demand going forward, cautioned Chaba.
The global supply chain has got a major setback, following the COVID-19 outbreak which emerged in the city of Wuhan last year, and has since caused a pandemic and spread to more than 70 other countries. China took two months to come out of the crisis.
Last week, the World Health Organization (WHO) recognised Europe as the epicenter of the outbreak, with many countries ushering in lockdown measures in an effort to contain the spread. Italy has recorded the most cases of COVID-19 in Europe, with nearly 28,000 confirmed infections and 2,158 deaths nationwide.
On Tuesday, German car maker Volkswagen announced it is preparing to temporarily shut down most of its European plants in the wake of the coronavirus pandemic.
Meanwhile, the supply for MG ZS, the electric offering from the company, that sources most of the parts from China, remains unaffected. Since its launch earlier this year, the company has received bookings of more than 2,600 units. It is now in the process of ramping up the production to 250 to 300 units a month over the next few weeks from the current 150 units.
Commenting on the company’s localisation strategy and whether the company has plans to reduce dependency on China, Chaba said, MG has been working towards increasing the locally-sourced parts in its model to 80-90 per cent in value terms in the foreseeable future. According to Chaba, it is practically impossible to not have any exposure outside its home market for any auto company .
“In manufacturing, even when a single component is coming from outside, you will have some danger. In the absence of any part, no matter what it is, the car cannot be produced. 100 per cent localisation is not possible — something or the other will have to be sourced. One can only diversify risk. In this kind of scenario, no matter what you do, you will be impacted,” he said.