Forging industry hit by production slowdown at India Auto Inc
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Exhibition Name: Forging industry hit by production slowdown at India Auto Inc
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The wholesale and retail sales numbers for India Auto Inc for October 2019 and the first seven months of the ongoing fiscal year are out. While retail vehicle sales during the festive season went up by 4 percent, wholesales saw a drop of around 12 percent overall , a challenging situation for OEMs and a bigger concern for component suppliers, who have had to cut down on their production.

Data released by the Society of Indian Automobile Manufacturers (SIAM) has overall production for April-October 2019 at 16,583,587 units, a drop of 15.25 percent year on year. A closer look at the segment-wise data reveals that 2,030,543 passenger vehicles were produced (-16.66%), 468,110 commercial vehicles (-29.89%), 687,275 three-wheelers (-9.73%) and 13,384,320 two-wheelers (-14.68%).

Commenting on the recent sales data, the apex body of the forging industry in India, the Association of Indian Forging Industry (AIFI) has expressed concern over the lack of demand with respect to fresh orders from the automotive sector. The association says that the trickle-down effect of slumping automobile sales has caused the forging industry to face the heat with a sharp decline in demand, which has resulted in substantial production cuts. Despite a marginal increase in sales, as reported by OEMs and retailers, the overall automotive components and forging industries have not seen an improvement in their order books.

AIFI says the data suggests that car sales for the top three manufacturers saw growth in the festive season — Navratri to Dussehra — wherein the country’s largest car manufacturers, Maruti Suzuki India and Hyundai Motor India, reported 7 percent and 10 percent growth respectively. For the same period, Mahindra & Mahindra registered a 100 percent spike in the sale of utility vehicles on Dhanteras. However, this spike in the sale at the retail/dealer level has failed to bring in any cheer for the forging industry, which continues to reel under production cuts and pressure for liquidation of inventory that has built up due to the changeover to BS VI norms from April 1, 2020.

AIFI has expressed concern over the lack of demand with respect to fresh orders from the automotive sector, and says that declining automobile sales has put pressure on the forging industry. The Indian forging industry primarily caters to the $57 billion (Rs 409,032 crore) Indian automotive industry, which accounts for 60-70 percent of the forgings production. With India Auto Inc witnessing its worst ever slowdown, the forging industry has witnessed a corresponding slowdown to the tune of 25 -30 percent.

S Muralishankar, president, AIFI said, “The recent slew of festivals saw few car manufacturers reporting a decent increase in sales at the retail level. As a result, we witnessed inventory clearance at the dealer level. The figures during the festive period clearly indicate higher retail sales than the number of wholesales. This increase comes after a drop in sale for the last two quarters, driven by higher discounts offered by the OEs (Original Equipment) to allow the liquidation of inventories."

"The production and demand at the manufacturing level haven’t seen any upward movement because of which the forging and auto-component sector continue to reel under the auto slowdown. Currently, there is a huge inventory build-up due to poor demand and to curb this, many forging units have been making proportionate cuts in terms of working hours and production. If this scenario stretches further, we anticipate more production losses and job cuts,” concluded Muralishankar.

Source: Autocar Professional
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