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    How car sales are accelerating the steel sector

    As of 2020, India was the world’s fifth-largest auto market, producing more than 22 million vehicles. This included two wheelers, three wheelers, quadricycles, passenger vehicles, and commercial vehicles. In 2019, multiple issues caused India’s auto economy to contract. Key among these were regulatory, rising input costs, semiconductor shortages, taxation, insufficient credit, and reduced spend on non-essentials. Even as the industry scrambled to offset this slowdown, the Covid-19 pandemic struck unexpectedly in two back-to-back waves. 

    India’s auto sector - gaining momentum 

    By August 2021, improved vaccination rates and preventive measures paid off and the devastating coronavirus is in a recession. As the rest of the Indian economy opened up progressively and the supply chain crisis in the auto sector eased up a bit, car sales also began emerging out of the slump. 

    Between September and October 2021, car makers posted a 40.1 percent growth in sales. The country’s passenger vehicle (cars, utility vehicles, vans) market is poised to hit 5 million-plus units by the end of 2024. Cars represent a major chunk of the passenger market.

    Global automakers increasingly see India as a promising destination for automotive engineering design services (AEDS), especially for compact cars. This segment is expected to grow further on the back of growing acceptance of Indian engineering skills and government incentives. Battery electric and hydrogen fuel vehicles, as well as other advanced mobility options are also on the government’s agenda.

    New incentives for auto industry 

    The production-linked incentive (PLI) scheme for automotive and auto components, announced this September is expected to increase India's share of the global automotive pie, apart from adding more jobs, in the next five years. The initiative incentivizes auto OEMs and component manufacturers working on advanced technology products and aims to attract fresh investments to these sectors over the next five years. Overall, these PLI incentives are expected to boost the production and export of advanced vehicles. New vehicle sales will also experience potential tailwinds from the vehicle scrappage policy announced by the government. As per the new policy, old, faulty and polluting commercial and passenger vehicles will be marked for deregistration. Besides, under the Automotive Mission Plan, both the government and auto industry envision a three-fold rise in the industry’s revenue in the next five years.  

    Currently the auto sector contributes 7.1 percent of India’s GDP; the plan will increase this contribution to 12 percent as well as add millions of jobs in the sector. India aspires to be a $5 trillion economy by 2025, and the automotive sector is key to this growth.  

    Demand for high-strength auto steel

    While alternatives materials (plastic, aluminum, composites) have been suggested from time to time for use in car manufacture, stainless steel remains the most preferred raw material across the world. And this has been the case for almost a century now. The reasons being its high-strength, durability, and reliability. 

    At a per-unit-level, nearly 840kg of steel goes into each compact car. On average, this alloy accounts for 60% of a vehicle’s weight. Most of this steel is used in the body, closures, and vehicle frame, including powertrain, engine, tires, and suspension system components. Not surprisingly, the automotive industry contributes about 10-12% of the overall steel demand in India. The majority of new vehicles use advanced high strength steels

    Need for steel industry to scale production       

    A thriving industry like the automotive sector needs a steady and timely supply of high-quality automotive steel. The country's steel production capacity stands at 143.91 million tons; the private sector accounts for more than four-fifths of this output. The top steel producers, including private and public sector players, have significant throughputs, with respect to automotive steel of every variety – light, mid, and high-strength. It’s certainly one of those win-win scenarios. 

    In order to make the best use of this favorable circumstance in the steel marketplace, India’s steel manufacturers would need to ramp up production by a factor of 2 or even 3 in order to keep pace with the auto sector that is gunning for growth. Apart from streamlining production, it’s important that steel industry participants offer comprehensive solutions that address all of their clients’ steel requirements. After all, one size doesn’t fit all.  For instance, MSMEs have high quality, cost and delivery expectations. They like to work with steel solution providers who can also provide after-sales insights and inputs.  So, the industry definitely needs to do a lot more in order to exceed the demands of various clients, especially micro, small and medium businesses. For consultation and assistance, contact JSW One.

    Focus on sustainability  

    While pursuing rapid growth, steel makers need to embrace eco-friendly initiatives that will help make the industry more sustainable. At JSW, we design products keeping in mind the need to protect the environment and reduce consumption of scarce natural resources. By its very nature, steel is a one-of-its-kind sustainable material. Once it is made, it can be recycled, almost infinitely. Even so, we are committed to continuously pushing the envelope of possibility in the sustainability area.

    More recently, electrical grade steel developed by our researchers is helping reduce power losses and our greenhouse gas footprint. Our Platina tinplate steel, another recent product, is targeted at the packaging industry and is considered a better and sustainable alternative to single-use plastic. For context, India has pledged to eliminate single-use plastics by 2022.

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