There is almost a sense of déjà vu about the COVID script playing out in China. A little over three years ago, when the Wuhan virus first hit the headlines, there was just a passing interest in India till its impact hit home in a big way.
This time around, there is less anxiety even while China has its back to the wall. Japan, South Korea, Europe and the US are also clocking enough daily COVID numbers to cause a fair degree of anxiety. Alarm bells have not begun ringing in India yet but given the catastrophic experience of the deadly Delta wave in 2021, the Centre is taking no chances now.
“Right now, nobody knows how serious the problem is, especially when you are talking about China and its inherent opacity,” says a senior automotive executive. According to him, reports doing the rounds of massive infections and deaths looming large in China remain unconfirmed and it could just end up being a case of “too much smoke without any fire”.
Supply Chain Disruption
Yet, the executive admits that things could get out of control if China imposes stringent lockdowns and shipments to India and other countries get severely impacted in the process. The harsh reality is that China remains the epicentre of the world for a host of industry segments (including automotive) and any disruption in supplies can wreak havoc.
From India’s point of view, this is something it simply cannot afford. Through 2020 and ’21, economic growth went for a toss as the lockdowns threw life out of gear and GDP just plummeted. It is only over the last year that sales of premium cars and two-wheelers are showing a rapid rebound as also other critical industries like aviation and hospitality.
Memories of the difficult times are still raw in people’s minds and the Centre is keen to ensure that there are no slip-ups this time. A huge degree of complacency had set in the early days of 2021 and election rallies were conducted without a care in the world till the Delta variant hit the landscape with a vengeance. Daily infections reached record highs and morbid scenes of oxygen shortage and long queues in crematoria still haunt those who had to go through this difficult period.
Masks Could Be Back
The good part is that large parts of the populations have had their mandatory vaccine shots even though many have steered clear of the booster dose. Depending on how the scenario plays across China and other parts of the world, the Centre will then direct states to make wearing of masks mandatory as also the booster dose along with other measures.
Automakers do not expect any draconian measures to be implemented in 2023 since the situation is way different from the earlier years, when COVID remained an “unknown animal” with no solution to keep it at bay. There is today a greater sense of understanding that it is here to stay and is not likely to be so diabolical once preventive measures are in place. Here is where the vaccination programme has helped India’s cause and industry is far more confident about meeting the challenge head-on.
“Hopefully, all the fears about China going out of control do not translate into reality and 2023 ends up being a normal year for the world,” says a top official of another automotive company. It is particularly important for India whose GDP growth projections are “way better” than other parts of the world including rich countries in the West, which are on the tip of a recession.
China, likewise, has been seeing slow growth and the current wave could derail its prospects even further. This does not mean that there is any reason to gloat for India, especially in the context of Atmanirbharta or the ‘China Plus One’ strategy, simply because the journey has just begun. China, in contrast, has had a head-start of over two decades and the economies of scale it has attained since then is what is meeting the needs of other countries.
China As EV Epicentre
For those automakers depending on China for electric vehicle parts, things could get a little tricky if supplies are severely impacted due to the current COVID spread. “If things go really bad, the whole manufacturing machinery of China and export factories will be impacted. In the process, global trade could also be severely affected. There will only be a lot of uncertainty but all this remains a big IF,” says a top CEO.
It was in April this year when China had gone in for a big lockdown following another COVID outbreak and this caused a lot of concern in India, especially for EV parts whose shipments were severely hit.
At that point in time, regions like Suzhou (which are huge manufacturing hubs) were locked down. Beyond this, ships which were scheduled to pick up goods from Chinese ports for global deliveries, were stuck for days since port operations had come to a near standstill.
Adding fuel to the fire was the shortage of drivers in China, who were deployed to deliver goods at ports and, conversely, receive consignments too. They were asked to furnish documentary proof that they were COVID-negative and this became a challenge with people directed to stay indoors. It was a trying time for many carmakers in India, which were sourcing their electric parts from China and they could do nothing much other than twiddling their thumbs and waiting.
Information Bottleneck
Clearly, Indian industry will be hoping that there is no such encore this time around except that it is impossible to predict any scenario when it involves China, whose political leadership rules with an iron fist and updates on the pandemic or lockdowns may not be completely true.
As an executive had told this writer during the April lockdown, “Nobody has any data on the actual number of infections or deaths and one can only speculate when the Chinese government will choose to lift the lockdown and allow normal life to resume.”
The last edition of the Delhi Auto Expo in February 2020 had seen masks being distributed at the venue, even while the Wuhan virus was just making news and had still not made its presence felt in India. MG Motor and Great Wall Motors (which had just announced its takeover of the General Motors plant at Talegaon near Pune) were among the Chinese participants along with FAW.
Wait-And-Watch Mode
By end-March, India had imposed a lockdown with more to follow. While the pandemic was only one part of the story, it had to deal with the Chinese army playing rogue on its borders. Relations between the two countries have only deteriorated with fresh tensions surfacing again between the armed forces of the two countries.
The fractured relations have led to Great Wall Motors shelving its India project after two years of waiting. Changan Automobiles also decided to drop its plans for the country even while speculation was rife that it was eyeing the Ford plant near Chennai.
The 2023 Auto Expo, which kicks off in the next three weeks will see MG Motor and BYD participating. Both companies have seen heady customer response to their products but will find it difficult to make new investments given the levels of hostility building up between India and China. As if this was not enough, COVID has now emerged as the next worry and the hope is that it dies a quiet death.
“The world is between a rock and hard place with geopolitical tensions at their peak. You have the Russian war on Ukraine and the possibility of China invading Taiwan. Beyond all this, is the pandemic which just refuses to go away,” sighs a clearly exasperated auto executive.
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