Forging industry body says auto electrification may lead to the closure of 60% of units

The Association of Indian Forging Industry (AIFI) has indicated that electrification in the automotive sector may lead to the closure of 60 per cent of forging units in the next few years.

While the electric vehicle push in India will create new business opportunities, it may also cause serious challenges to the forging industry, it said in a statement.

“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 unutilised forging capacity. Internal combustion engines in automobiles contain about 2,000 moving parts, whereas electric vehicles have only 20. We anticipate that EV growth will shut 60 per cent of the forging and casting industries in the next few years, resulting in loss of jobs,” said Vikas Bajaj, President, AIFI.

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Alternative areas

But he pointed out that the forging industry would need to look into alternative options such as aluminium forging and expand into non-automotive areas such as infrastructure, defence, healthcare and railways, where the present government is also substantially investing.

“Moreover, as an association, we would be delighted if the government promoted hybrid vehicles over electric vehicles, as a hybrid contains both an internal combustion engine and an electric motor. Also, as the price of these vehicles declines closer toward the cost of EVs, we are gradually seeing the hydrogen vehicles take centre stage,” he added.

MSME sector

The forging industry in India comprises 85 per cent of the MSME sector. With an annual output of about 20 lakh tonnes (FY21), the Indian forging industry has close to 400 forging units, of which 80-82 per cent can broadly be categorised as tiny and small enterprises, while 10 per cent will be under the medium segment and the remaining units will be large.

With a total production worth ₹45,000-50,000 crore, the forging industry provides direct employment to more than 3 lakh people in the country along with an additional 60,000 contract labourers.

Meanwhile, AIFI said the forging industry witnessed a challenging time in the first half of 2022 due to increased input costs, particularly steel, aluminium, and nickel prices. First half of this calendar year was the most difficult period for the small and medium segments, which are expected to witness a 50 per cent decline in production in FY23.

“The volatility in steel prices has damaged the Indian forging industry and disrupted the automotive supply chain. Rising input prices and a decrease in vehicle demand could cause capacity utilisation at forging plants to decline from 80-85 per cent pre-pandemic levels to about 50-55 per cent,” said Yash Jinendra Munot, Vice-President, AIFI.

The last two years have seen a double-digit fall in India’s overall automotive sales due to the -19 outbreak and various factors, including a shortage of semiconductor chips, rising input costs, rising commodity prices, and rising fuel costs (FY20 and FY21), leading to stagnant order books for the auto parts makers.

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