Automobile Corporation of Goa (ACGL), a bus manufacturing unit for Tata Motors, located at Honda faces extremely difficult times owing to the coronavirus pandemic and is fighting hard to stay on road.
The company that is a major source of employment and business to several small units in surrounding industrial estates has taken a heavy hit on its financial stability due to severe demand contraction for automobile products in the country including buses. Presently the ACGL factory is under block closure to adjust production with demand.
“The block closure is for five days to reduce the fixed cost on electricity, water and other operating expenses. It is the second during the month of July,” revealed O V Ajay, CEO and Executive Director, ACGL.
The company’s revenue was down 92 per cent to Rs 9.4 crore in the three months ended June 30, 2020 from Rs 121.5 crore in
the corresponding period of 2019-20. The net loss was Rs 6.9 crore during the first quarter of the year as against a net profit of Rs 6.6 crore in the previous year’s quarter.
“Even the second quarter of the year, July-September is going to be very challenging,” Ajay said. He said that the demand is not there. “Mobility has taken a hit due to the pandemic crisis. With schools not going to open in the near future the demand for school buses has come down to very low numbers. What we would have done in a healthy quarter of close to 1,000 school buses is down to just 100,” said Ajay.
ACGL is focusing on increasing efficiency to ride through the crisis. “We are optimizing our production, improving productivity and enhancing product attractiveness,” said Ajay. He added that the company is also exploring alternate production locations within the country that is closer to its markets to optimize manufacturing costs and reduce the cost of transportation of its buses to end users.
“April-June results reflect the peak of the lockdown due to the COVID situation. We faced loss of production which was the problem faced by a sizable number of organizations in India,” he said, adding that with demand in the automobile industry remaining compressed, the environment ACGL will operate in for the rest of the year continues to look challenging.
“In the immediate future ACGL is not looking at growth, it is the question of survival in the short term,” said Ajay. He said that problems caused by COVID-19 have added to the already difficult market situation faced by the company.”
“Competition is aggressive due to the entry of MNCs that are forging collaborations with other bus body companies. The industry has become very aggressive in pricing, and the geographical distance when exploring markets in the South, North and East of the country is an added disadvantage.”
Tata Motors is 49.7 per cent stakeholder in ACGL. The company has about 550 permanent employees but indirectly supports close to 1,500 workforce in the contractual category in manufacturing and non-manufacturing functions.