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India auto-casting industry growth seen slashed by tighter emissions controls

25, Apr. 2019


By Atul Ranjan

NEW DELHI, NNA - Growth in India's automotive casting industry will slow by about half in the year to March 31, 2020 ahead of tighter emissions controls by the government, according to a report by credit rating agency Crisil Ltd.

Year-on-year growth in the industry, which supplies cast engine components for gasoline-powered vehicles, is likely to decelerate from an estimated 20 to 22 percent last fiscal year to a range of 9 to 11 percent in the current 12-month period, Crisil, a unit of Standard & Poor’s Financial Services LLC., said in a report released earlier this month.

Bharat Stage VI, to be adopted in India in April 2020, is the most advanced emissions standard for automobiles, equivalent to Euro-VI norms in place across Europe.

Carmakers are scaling back production of vehicles that will not meet the tighter controls.

Sanjay Shroff, vice-president of the Institute of Indian Foundrymen, said the auto-casting industry is focused on meeting auto industry requirements for components for BS VI-compliant engines aimed at reducing air pollution.

At the same time, only a few carmakers such as Honda Cars India Ltd. and Maruti Suzuki India Ltd. have launched BS VI-compliant vehicles.

With the newer compliant models likely to cost more, due to the addition of more electronics and sensors, auto-casting industry growth will come largely from people buying cheaper, more heavily polluting BS IV vehicles ahead of the deadline, Crisil said.

“BS VI norms will lead to the addition of both non-casted components and more electricals/sensors and changes in the electronic control unit (ECU), which will push up prices across vehicle segments,” the report said.

“We estimate auto-castings sales (in value terms) to grow 9-11 percent in fiscal 2020 [ending in March 2020], largely driven by volume growth owing to expected advancement of sales in fiscal 2020, ahead of the institution of BS VI norms.”

The auto-casting industry posted revenue of 500 billion rupees ($7.2 billion) in the year to March 2018, according to Crisil.

In the longer term, the proliferation of electric vehicles spells the eventual death of conventional internal combustion engines. India has set an ambitious goal to increase the share of EVs on the country’s roads from the current share of around 1 percent to nearly 30 percent by 2030.

Amish Panchal, partner at Kastwel Foundries, a supplier of raw materials to foundry and casting manufacturers, said the auto-casting industry is bound to be affected by the technological shift taking place in the auto industry.

“So, we are not only expecting demand for auto-casting parts to slow down during the transition phase from BS IV to BS VI in the current fiscal year but also post BS VI implementation,” he told NNA.