AIFI Reports of a 60% Decline Over the Next Few Years Due to Electric Vehicles

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Source: Association of Indian Forging Industry (AIFI)

“The industry is still going through challenging circumstances, and the forging sector faces new challenges on a regular basis. The volatility in steel prices has damaged the Indian forging industry.” - Yash Jinendra Munot, Vice President, AIFI

August 2022 : The Association of Indian Forging Industry (AIFI) has witnessed a challenging time in the first half of 2022 as a result of increased input costs, particularly steel, aluminium, and nickel prices. The Forging sector, combined with a decrease in automotive demand, is expected to reduce capacity utilization in FY23.

The first half of the year was the most difficult for most forging companies, particularly those in the small and medium segment, which are expected to witness a 50% decline in production in FY23. The last two fiscal years have seen a double-digit fall in India's overall automotive sales due to the COVID-19 outbreak and various factors, including a shortage of semiconductor chips, rising input costs, rising commodity prices, and rising fuel costs (FY20 and FY21).

Yash Jinendra Munot, Vice President, AIFI said, “The industry is still going through challenging circumstances, and the forging sector faces new challenges on a regular basis. The volatility in steel prices has damaged the Indian forging industry. The forging industry's core requirement is "STEEL," and the present price increase has disrupted the supply chain.”

Explaining more he said, “Furthermore, high raw material prices remain a challenge, and high fuel prices continue to influence customers and buying decisions. The automobile industry accounts for around 70-80% of our industry. Rising input prices and a decrease in vehicle demand could cause capacity utilization at forging plants to decline from 80-85% pre-pandemic levels to approximately 50-55%. While steel prices were unavoidable given global trends, a more prudent and balanced approach would have been preferable for the business. With demand not picking up, fuel price increases, and a semiconductor shortage, automobile OEMs have little room to pass on additional price increases, and the forging sector anticipates a difficult year ahead.”

Vikas Bajaj, President, AIFI, said, “The electric vehicle sector will have a significant impact on the forging industry since the demand for moveable parts used in vehicles will decrease, resulting in considerable unutilized forging capacity. Internal combustion engines in automobiles contain around 2,000 moving parts, whereas electric vehicles have only 20. We anticipate that EVs will shut 60% of the forging and casting industries in the next few years, resulting in employment and unit closures.”