Indian Auto Firms Cutting Q4 Production Plans on Steel Shortages
Economic Times reported that a significant shortage of steel supplies and higher price of the key raw material have led to a sharp revision in the production schedules for the fourth quarter at leading carmakers in India and the production schedules for the ongoing fiscal Q4 are being revised downward by 15-20%, which could potentially mean a loss of over 1.5 lakh units in the January to March quarter for the industry. ET report said that “India’s largest carmaker Maruti Suzuki has revised its tentative production plan from 5.5 lakh units estimated in November 2020 to 4.97 lakh units in January 2021 and also cut shift timings by two hours for some days at its plants. Mahindra & Mahindra and component maker Bosch had already warned of lower production in the first couple of quarters in 2021 due to a shortage of semiconductors.
Major associations of automotive manufacturers, auto component manufacturers and construction equipment makers have written to the steel and commerce ministry to intervene and facilitate local supplies or open up low cost imports.
The Society of Indian Automotive Manufacturers told the steel ministry in a note that the shortage might become more acute in the coming quarter and lead to further price increases. SIAM Director General Mr Rajesh Menon wrote to the steel ministry "Shortage and price increase are creating a huge impact on production of automobile companies. The domestic steel mills are therefore committing only 60% to 70% of the orders given by the automobile OEMs.”
The Automotive Component Manufacturers Association in a note to the commerce ministry said there has been a 40% increase in steel prices over five months and that there is uncertainty over its availability, which has put a strain on them to commit smooth supplies to the customers. ACMA Director General Mr Vinnie Mehta wrote to the ministry "The Tier1s are not able to pass on these price increases, as there is a huge gap in customer & OEM prices and the prevailing market prices.”
The auto sector accounts for 15-17% of the total steel consumption of India. Flat steel accounts for about half of total steel production and about one third of this is consumed by the auto sector.