India’s automobile industry had the best the fiscal year 2017-18 (from Apr’17 to Mar’18) with auto manufacturers showing all-time high sales across segments.
The recovery in country’s rural economy along with the launch of various new models in the fast-growing SUV (Special Utility Vehicle) segment space has boosted the country’s automobile sales significantly in FY18.
According to market reports, the cumulative domestic vehicle sales growth in FY18 was 13-15% hitting the double-digit mark for the first time since FY12. The two-wheeler, three-wheeler and commercial vehicle segments have each posted record double-digit growth, despite uncertainty over the implementation of GST (Goods and Service Tax) and transition to new emission standards.
This growth in auto sector has subsequently boosted country’s steel demand as the percentage contribution of automobile segment in India’s total steel consumption stands between 10-12%. The SIAM (Society of Indian Automobile Manufacturers) data shows that in FY18, the country’s steel demand from auto sector has increased by 10% y-o-y basis from 6.54 MnT in FY17 to 7.2 MnT.
The correlation between growth in the auto sector and CRC demand
Amongst all the steel products that are used in auto sector, CRC has the highest usage and the surge in automobile demand has benefited Indian CRC manufacturers. The domestic CRC prices in India has recorded an increase of about 15% over a time span of one year amid increased demand and hiked raw material prices.
In FY18, India produced 7.82 MnT of CRC and imported about 1.1 MnT primarily of special grades and dimensions for specific components in the vehicle majorly from South Korea and China. India’s export of CRC of 1.4 MT has been sent to Belgium, Italy, Nepal and Spain. The only challenge for Indian CRC industry is that the auto-body sheets are not available in full size/width and other dimension required and thus requires major steel producers to produce and meet this gap in coming years as the auto sector demand is anticipated to improve further.
The positive outlook of Indian auto sector and the subsequent boost to CRC demand
As per SIAM, the performance of Indian automobile segment is expected to improvise in FY 2018-19 amid revival of economy post demonetization and enforcement of GST. The GDP (Gross Domestic Product) and economic reform programmes of the government are indicating positive signs of recovery. The GDP is marked to pan out at 7.6% during 2018, according to SIAM, giving a leg up to the industry and manufacturing activities.
A strong cyclical recovery in the global economy with the world growth projected at 3.7% in 2018, bank recapitalization, rural revival, and reforms such as Insolvency and Bankruptcy Code by the government will also give a fillip to the Indian auto sector. The consumer price inflation is expected to spike up to 4.4% in FY19, from the current 4%, interest rates may see a moderate hike and global crude oil prices are also not expected to spiral.
In a press media interaction, SIAM official has mentioned that the two successive monsoons in last two years have put the rural economy on the growth track, boosting utility vehicles, motorcycles and small commercial vehicle sales in the rural markets and 2018-19 is expected to bring positive sentiments back into the market and boost the overall vehicle’s sales thus encouraging CRC demand in the country.
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