According to AIFI, increased adoption of electric vehicles could negatively impact domestic forging and casting industries. This would result in lower capacity utilisation because there are fewer moving parts in these vehicles than in traditional ones. According to the Association of Indian Forging Industry, 60% of sectoral players could be affected by rising input prices unless government encourages hybrid vehicles and not just electric ones.
The automobile sector accounts for between 70 and 80% of domestic forging demand. Despite deceleration within the auto sector, the average slowdown in forging capacity has been around 50%. The electric vehicle sector will have a major impact on the forging business as the demand for moving parts in vehicles will decline, which will result in significant unutilized forging capacity.
Vikas Bajaj, President of AIFI, stated that EVs are expected to close 60% of the forging- and casting industries within the next few years. This will result in joblessness and unit closures. According to the association, an electric drivetrain has only 20 moving parts, whereas a conventional drivetrain can have 2,000. Indus Law and EY collaborated on a recent study that found India’s electric vehicle registrations rose by 168% year-on-year, to approximately 330k units by 2021. According to the study, domestic EV demand will rise to 9 million units by 2027. He said that the forging industry would need to explore alternative options like aluminium forging, as well as expand into areas other than automotive, such as infrastructure, defence and healthcare. This is where the government is investing heavily.
AIFI claims that the government could avoid this situation by encouraging hybrid vehicles to be used. These vehicles can run on either an internal combustion engine (ICE), or an electric motor. It also stated that the industry will need to explore other options, such as aluminium forging, and expand into non-automotive industries. AIFI stated that the first half of the year was difficult for the majority of forging companies, especially those in the small- and medium segments. They are likely to see a 50% decline in production for FY23.
The Indian automobile market has seen a steady improvement in month-on-month sales in the first half of CY 2022. This includes all segments except tractors, which saw a 5.34% decrease in monthly sales. This is due to the fact that it contains more forging parts than other vehicles.
The industry continues to face difficult circumstances and the forging industry faces new challenges every day. The industry has been affected by the volatility in steel prices, which are our main requirements. The current price rise has also disrupted our supply chain. Moreover, high raw materials prices are still a problem, and high fuel prices continue influencing customers and their buying decisions,” stated Yash Manot Vice President of AIFI.
He said that rising input prices and decreased vehicle demand could lead to a decline in capacity utilization at forging plants from approximately 80-85% pre-pandemic to around 50-55%. Munot said that the lack of demand increased fuel prices and a shortage in semiconductors meant that automobile OEMs are unable to pass on any additional price increases. The forging industry expects a tough year ahead. According to the Association, the forging industry is experiencing the heat from rising production costs. Recovery after the pandemic could take up to two years.