India Inc vs COVID-19: Local supply chains needs to be kept strong
Swapnil Jain, Co-founder & Chief Technology Officer, Ather Energy feels that in times like the present situation when geopolitical situation is uncertain, relying on international sourcing can be risky.
TPCI: How did the COVID-19 pandemic impact Ather Energy in the initial days till the lockdown was announced?
Swapnil Jain (SJ): The impact before the lockdown wasn’t very direct because we are a vertically integrated company with most key components being built in-house. For other ancillary parts, we had set up a local supply base In the last 12 months. Since the international lockdown, there has been an indirect impact on raw materials, cells and lots of passive components in electronics coming from China, South Korea, and Taiwan.
And we were preparing ourselves for the lockdown even before it was announced by letting about 70% of our employees work from home from early March.
TPCI: Was the lockdown totally unexpected, or were you anticipating such a situation given global cues? If so, how were you preparing for the same?
Swapnil Jain (SJ): We were expecting a full-scale lockdown and we used the first 2-3 weeks of March to test and improve standard operating process across the organization for the employees working from home, including creating learning and upskilling opportunities for team members who couldn’t really complete their day-to-day duties from home (example retail and service teams)
We also stopped all national and international business travel and had recommended that employees also refrain from personal travel, along with 14-day isolation if they did travel.
We closed our experience centers for test rides and were only offering emergency roadside assistance, rather than our periodic service visits.
TPCI: What operations have been most critically impacted as a result of the lockdown? How do you expect them to impact your business in the coming days and the financial year?
Swapnil Jain (SJ): Our production, retail, service, and on-road testing departments will stay closed until the spread of the virus is quelled. The rest of the departments are actively functioning, we are focussing on improving the operations and using this time to work on our expansion plans. This time has given us the opportunity to plan and build for tighter operations for our pan-India expansion.
The lockdown has certainly disrupted the local supply chains and manufacturing. But we have to assess the long term impact of the virus, it could vary from 2-3 months or we could feel the effect of the market lockdown throughout the year. While demand will come down across all categories, EVs are starting still catering to a small audience and the impact maybe lower than for our fossil-fuelled counterparts. The products and manufacturing aside, financing options for consumers will take precedence to enable new sales in the coming months.
TPCI: What critical steps have you taken to address/minimize the business disruption during this period (lockdown)?
Swapnil Jain (SJ): We are effectively utilizing this downtime to rework on our long term strategies which had a hit by the pandemic. Various teams are trying to make the best out of it through collaborative learning programs and also working on our business as usual processes.
TPCI: What contingency steps are you contemplating in case the lockdown lasts longer? What will be the key challenges and tactical difficulties you see in coming back to business-as-usual once the crisis passes over?
Swapnil Jain (SJ): We expect the impact to last for a few months to a year, so we are preparing on all fronts to tackle the market changes ahead. We are more focussed than ever on delivering a high quality product and are improving our internal and external operation teams to meet the requirements. We are going to be building a new plant in Hosur, Tamil Nadu in the coming months to meet the demand for the Ather 450X and will use the next few months to build and strengthen the awareness and desire for the product line.
For a lot of OEMs the supply will be severely affected for the next few months, especially those that are dependent on international partners. Ather has a strong local supplier base for nearly 90% of the product being indigenously built and sourced but even we expect to see some delays ahead.
It is too early to be sure about the impact on consumer demand because EVs still cater to a niche audience and we will have to assess this based on how markets recover in the coming months.
TPCI: COVID-19 is rightly considered a black swan event of epic proportions, which no one could have predicted till a few weeks ago. What key lessons can the industry learn from this crisis to prepare for such events in the future?
Swapnil Jain (SJ): Depending on how long the lockdown nationally and internationally lasts, it will change how businesses operate. Brands for the first time are being forced to think of staying relevant in a world where there are no physical touchpoints and more dependence on digital engagement could emerge because of changing purchase behavior in case of further lockdown extension.
Local supply chain and technology are the important factors to be kept strong. Geopolitical situations become tense in times like this and it is more important to keep the local supply chain strong.
Companies should be flexible with supply chain, product strategy, engineering skill sets, etc, even if it comes at some cost. This will change supplier and partner engagement and will refine the relationship between OEMs and their suppliers. Quick adaptors could survive better in these tough times.
The pandemic is also expected to affect purchase behavior if people’s livelihoods are affected in the long run. There are already signs with several industries laying people off and many cutting salaries.
TPCI: What critical steps will be necessary as businesses return to normal post the lockdown, in your view?
Swapnil Jain (SJ): The country is facing serious economic challenges as a result of COVID-19, and every Industry is affected by it. Irrespective of the sector, we don’t expect businesses to jump back to normalcy soon after the lockdown is lifted, it is going to be a new normal and business could evolve for a better tomorrow. Like mentioned earlier, companies will have to adapt to changes like being flexible with supply chains, product strategy, and many other aspects of the business.