There are now clear-cut signals that India is recognized as a global strategic necessity in the manufacturing field. As evident from the auto sector, a distinct shift is now towards India.
Global OEMs and Tier-1 firms have started appreciating the advantages of India’s open market economy, transparent and liberal policies, its engineering and manufacturing skills as well as its ability to handle global business. Keeping this in view, the market potential continues to grow for the auto component sector. Within the auto sector, commercial vehicles remain the mainstay for the forging industry. And going further, newer generation cars will require better quality forgings.
Looking at the overall long term picture, the vehicle industry seems well poised to achieve a figure of 3 million passenger cars by 2015, according to the Association of Indian Forging Industry (AIFI).
The body estimates the Indian auto component industry to reach $30-40 billion by 2015. The growth is expected to be encouraged by exports which could be worth $20-25 billion by 2015. Going by these estimates a conservative estimate (15-20 per cent) of the production of forgings by 2015 would be to the tune of $6 billion.
However, the industry has to confront challenges at present due to ongoing slowdown. The domestic forging industry is thus looking to reduce its dependence on the auto sector, which accounts for a share of about 70 per cent of total production.
According to the AIFI, the forging industry is likely to see a marginal fall in production this fiscal from previous year’s level of 2.8 million tons, following a lukewarm response from its principal customer, the automotive sector.
For instance, the car sales declined for record eight months in a row in June, declining 9 per cent, as the low consumer sentiment hits demand. As per figures provided by the Siam (the Society of Indian Automobile Manufacturers) sales of vehicles across all categories dropped 5.1 per cent to 14,07,767 units in June from 14,83,443 units a year earlier.
By offering innovative products, the forging industry is now seeking to increase the overall exports from 25 per cent. Significantly, the domestic opportunity itself is pretty huge.
The Rs. 15,000-crore Indian forging industry is poised to grow by over 20 per cent a year and see investment of about $3 billion (about Rs. 15,000 crore) by 2015 for capacity expansion, according to the Association of Indian Forging Industry.
The industry, which thrives on 70 per cent of its business coming from automotive sector supplies, says that it is undeterred by the current slowdown in the sector and turmoil in other markets. From an average growth of about 25 per cent a year, the automotive sector in India this year has come down to about 8 per cent. This is not small even by any comparison to other markets which have had de-growth. But what is interesting is the potential for the domestic automotive market to grow to a 10 million per annum from three million.
