The forging and auto component industries anticipate festive cheer

New Delhi, October 28, 2022: The Indian forging and component industry is cheered with the festive season this year as auto sales rebound after a two-year slump. The Indian auto industry experienced strong sentiment across segments in September 2022, with an overall YoY growth of 21.2%. Even on quarterly basis, the industry rose by 18.3% YoY, closing Q2 FY22 with retails of 6,052,628 units, up from 5,115,112 units at the same time last year. Sales in all categories increased significantly with 2W, 3W, CV, PV and tractors growing by 52%, 115%, 48%, 70% and 58% respectively. The domestic passenger vehicle industry recorded its best-ever monthly sales performance in September due to strong festive demand which is a result of improved semiconductor supply and favourable production conditions.

The auto industry witnessed significant growth in sales last month; 3,54,702 units were sold in September 2022 compared to 1,87,144 in the same month the previous year with an increase of 89.5%. Leading manufacturers like Maruti Suzuki, Hyundai, and Tata Motors were able to boost their dispatches to dealers last month due to improved production with the easing of chip shortage situation. Thus, the overall Auto- Components and forging industry have seen an improvement in their order books.

Association of Indian Forging Industry (AIFI), the apex body of the Indian forging industry is pleased with the festive spirit but has raised concern over high costs for steel, aluminium, and nickel since steel price volatility has impacted the sector. As a result, rising production costs are having a negative impact on the forging industry.

Mr. Vikas Bajaj, President, AIFI (Association of Indian Forging Industry) said, “The auto industry achieved the 10-lakh sales mark between July and September 2022. This is encouraging news for the Indian Forging Industry, as we primarily serve the Indian Automotive Industry, which accounts for 70-80% of forging production. Sales were hampered last year as a result of a global shortage of semiconductors. The auto sector has grown this year as chip shortages have eased. However, increased commodity prices, high interest rates, inflation, and high CNG expenses, as well as the Russia-Ukraine crisis, are cause for concern and may have an impact on the market in the coming quarters. Furthermore, the volatility of steel prices has harmed the Indian forging industry this year. While steel prices were unavoidable due to global trends, a more prudent and balanced approach would have been preferable for the business. We will need to monitor how the economy performs generally, as well as how inflation and interest rates move in the future”.

Mr. Yash Jinendra Munot, Vice President, AIFI said, “A prosperous festive season is expected, and we are optimistic. We anticipate that this year’s festive season will be the best in terms of vehicle sales. However, the electric vehicle sector remains a big concern for the forging and auto component industries since demand for moving parts used in vehicles will decrease significantly, resulting in considerable unutilized forging capacity. In the coming years, we estimate that EVs will eliminate 60% of the forging and casting industries, leading to job losses and business closures. It will take at least a decade in India to entirely shift to EV’s. However, the forging industry must consider alternate options such as aluminum forging and expand into non-automotive sectors such as infrastructure, defense, healthcare and railways where the current government is also investing heavily. As an association we would be delighted if the government encouraged hybrid vehicles over electric vehicles (EV)”.

The Impact of Electric Vehicles on the Forging Industry: The global electric vehicle (EV) market is expanding rapidly. The Indian EV market is also continually growing, with close to 0.32 million vehicles sold in 2021, marking a 168% increase YoY. The Indian automobile industry is the fifth largest in the world and is anticipated to become the third largest by 2030. The EV push in India will creates a slew of new business opportunities. As the industry is rapidly shifting towards EVs, the government is focusing more on safety regulations that will provide more stability, quality, and efficiency.

The forging industry in India comprises 85% of the MSME sector. Over 3 lakh people are employed directly in the industry, with an equal number employed indirectly. Indian forging industry is the second largest in the world, next only to China. The forging sector has been identified by EEPC as one of the key sectors for export growth. The Indian Forging Industry has always been a growth driver of the Indian manufacturing sector and it is one of the important industries enabling and sustaining the success of the country’s automotive, power, and general engineering sectors. The industry has been meeting the requirements of OFM’s under the Ministry of Defense by being a significant contributor to the ‘Make in India’ initiative.

With an annual output of about 20 Lakh Metric Ton (FY 20-21 Approx.), the Indian forging industry has about close to 400 forging units, of which 80 to 82 % can broadly be categorized as Tiny and Small Enterprises. While 10 % are Medium Sized, the remaining being Large Scale.

While SMEs contribute 30% of forging production, the Medium and Large-Scale units contribute 70 %. With a total production worth INR 45000-50000 crore the forging industry provides direct employment to more than 300,000 people in the country along with an additional 60000 contract labourers.