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Falling Auto Demand in India Affects the Steel Industry

Asia / Ferrous metallurgy

The Indian auto industry is increasingly plunging into a crisis, many manufacturers are suspending the production of new cars, and dealers are closing car dealerships due to overcrowded warehouses. All this negatively affects the metallurgical industry, for which the automotive industry is one of the main consumers.

Falling Auto Demand in India Affects the Steel Industry

Weak demand from the automotive sector in India has negatively impacted local production of cold rolled steel coils (CRC) and galvanized sheet, which are used to make body panels for vehicles.

According to the Indian Steel Ministry, CRC production fell 45 percent from a year earlier to 1.28 million tonnes in April-June, while galvanized sheet production fell 8.4 percent to 1.20 million tonnes. p>

Auto production in India declined 10.5 percent over the same period to 7.2 million units, according to the Automobile Manufacturers Association of India. Auto sales were impacted by slower economic growth and more limited availability of finance.

Automakers including Maruti Suzuki, Tata Motors, Renault Nissan and Honda Cars announced a production suspension in June due to low demand.

Demand is likely to continue to decline as more car manufacturers announce stops. Indian commercial vehicle manufacturer Ashok Leyland will close its Pantnagar plant in the north of the country from July 16-24 due to negative demand outlook.

According to the Federation of Automobile Dealers (Fada), 245 car dealerships have closed their dealerships due to unsold car inventories.

The fall in the availability of loans for car buyers and the working capital of dealers hit the auto industry. Banks remain wary of lending, Fada President Ashish Kale said.

A large number of outstanding NPLs are holding back lending, even as India's central bank cut lending rates to a nine-year low in June.

The demand for steel from car makers and component manufacturers has also declined. Domestic sales of steel wheel maker Steel Strips and Wheels India (SSWL) were down 22 percent from the prior year in April-June, and the company expects a further 19 percent decline in the current quarter in the current quarter.

India's automotive sector is in critical condition for many reasons. In addition to short-term liquidity concerns, the industry is undergoing structural changes as consumers prefer sharing platforms like Uber to drive their own vehicles, SSWL CEO Sanjeev Raghuwanshi said.

Analysts expect car sales to rebound from October as farm incomes pick up after the harvest season and Hindu festival kicks off.

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