- KredX Editorial Team
- 18 Dec 20
- business

At the onset of the nationwide lockdown due to the Coronavirus in March, India’s automobile industry came to a standstill. Valued at around $57 billion, this segment petitioned the government for financial aid in the form of a moratorium on loan interest payments and working capital support.
As it is, several small and medium auto enterprises were already facing cash shortages since the implementation of GST. This was due to the steep tax rates of 28% levied on around 40% of automotive parts and components. The pandemic-led nationwide lockdown only further accelerated such problems for the industry.
What Can Cause The Working Capital Decline?
While the entire economic slump is to blame for the current working capital issues faced by the automobile industry in India, here is a look at some of the extenuating factors that specifically harm this particular industry –-
Tremendous Shortage In Component Parts
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Limited Availability Of BS-VI Models In The Market
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Decreased Customer Footfalls
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Blocked BS-IV Inventory
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Increased Reliability On Online Retailers
How Can Automobile Companies Respond To Working Capital Problems?
Recovery from this economic slump will differ from one company to another. Businesses, which are quick to respond, will likely recover sooner than others. The following three-step plan can enable automobile companies to regain some of their lost traction –- Adapt work ethics and employee routine by providing flexible working options. Prioritise their health. A healthy workforce will draw in more profits than an absent one.
- Business owners need to get involved with real-time supply chain management, ensuring the availability of all essential parts. In short, working capital issues can be addressed through the implementation of a contingency plan.
- Acquire financing when cash is in short supply. Fortunately, companies can rely on alternative sources of funding, when typical bank loans are unavailable. For example, with invoice discounting, your business can leverage unpaid invoices to acquire emergency funds.