Mahindra CIE, one of India's largest auto components manufacturers, has resumed production in some of its plants in Europe but expects business in India to ramp up comparatively faster in the upcoming quarters.
The company's German and Italian plants have restarted and are ready to supply to automakers like Daimler and Renault, said a top company officials speaking to analysts. At least one plant in India of the company has also been restarted.
"Most of the OEMs are planning to resume production beginning of May. Some are planning to do it next week itself. Daimler and Renault already established production but at low rate. By end of May, production will be stabilised," said Ander Alvarez, CEO, Mahindra CIE.
The company is optimistic of a better ramp up in India given the pent-up demand for vehicles due to the ongoing lockdown, which is expected to get lifted in the first week on May, followed by the festive months later on.
"In India, once the lockdown is finished beginning of May we will start production and ramp up. It is important to say that uncertainty is very high but we are optimistic. We see ramp up in Q3 in India we will see the market revamping in Europe in Q4," added Alvarez.
IHS Global has forecasted that the passenger vehicle production will decline in 2020 by 24.4 percent but will grow at a pace of 5.5 percent compounded annual growth rate between 2020 to 2025. Like most companies, Mahindra CIE is also reviewing its capital expenditure.
"Only the most urgent and important will be approved. All heads of cost including labor being reviewed closely. Most European governments supporting companies through aid schemes to substantially reduce the labor cost burden for the next few months," the company said in its guidance.
Italy is paying 80 percent of the labour cost while Germany is paying 70 percent. The Spanish government is paying 35-40 percent of the labour costs. This is paid for the number of days the employee has not worked. In India however there is no wage aid provided by the government.
Mahindra CIE informed that the company received Euro 4mn for the January-March quarter through its usual wage bill comes to Euro 30mn. Mahindra CIE’s net profit tanked 86 percent during the January-March quarter to Rs 20.8 crore as against Rs 153.7 crore reported in the same quarter last year.
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