How Indian Automakers Are Staying Afloat Amid Low Sales

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In part one of this series, Sohrab Darabshaw explained the long view that Indian major steelmaker JSW Steel is taking by investing in the Indian automotive industry with its new 2.3 million-ton auto-grade steel manufacturing plant known locally as CRM-2. Here, he explains the Indian automotive industry in more detail.

While JSW is planning to divert some of the import business towards itself with CRM-2, India’s domestic auto market, for now, is in a dismal state. A report released today by the Society of Indian Automobile Manufacturers (SIAM), an industry body, said in 2012-13, sales of passenger vehicles had fallen 6.05 percent to 2.5 million units.

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This, despite an excise duty cut and over 100 models being introduced. Car sales fell 4.65 percent to 1.7 million in the year ended March 31, from 1.8 million in the previous year. Overall sales, including cars, two-wheelers and commercial vehicles, grew 3.53 percent to 18.4 million units in 2013-14.

The only silver lining for India was that all major economies – barring China, the US and the UK – reported a decline in passenger and commercial vehicle sales in 2013, said SIAM.

Analysts feel that 2014-15 may not turn out to be very different, and anticipate very modest growth. They are expecting sales to pick up from April 2015 onward. Going by the estimates of SIAM, the industry could even see about 150,000 jobs cut.

The slowdown has started hurting the bottom lines of Indian steel majors. While JSW Steel already manufactures automotive steel for underbody parts and supplies to car manufacturers from its 1 million ton CRM plant, the new CRM-2 will manufacture exclusively outer body panels for cars and SUVs. The company has been working with major automakers such as Honda, Maruti, Toyota, Ford and Mahindra for some time now, but for the immediate future, as the world over, automotive sales are down.

Added to all this is the fact that some Indian auto companies have decided to set up their own steel plants for their needs. MetalMiner has reported  how Mahindra, a well-known Indian automaker, had decided to set up a joint venture for processing steel.

Mahindra Auto Steel Pvt Ltd, the joint venture company between Mahindra Intertrade, which is a wholly owned subsidiary of the Mahindra Group, Taiwan-based China Steel Global Trading Corporation and Singapore-based Mitsui & Co (Asia Pacific) Pte, is seeking to redefine the steel supply chain in the Indian auto industry by investing about $24 million (US) in a new facility to process steel and make blanks, trapezoids and profiles.

Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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