Indian carmakers are squeezed between slowing sales and curbs on steel imports

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  • India’s carmakers have asked the government to temporarily suspend a number of curbs on steel imports, citing the possibility of delays to their manufacturing operations.
  • In a meeting with government officials this week, the representatives of the auto industry asked for a one-year period to adapt to the new norms.
  • Under the new norms, which were announced in June last year, foreign steelmakers exporting high-grade steel to India will have to get a certification from the Bureau of Indian Standards (BIS).
India’s carmakers have asked the government to temporarily suspend a number of curbs on steel imports, according to media reports, citing the possibility of delays to their manufacturing operations. In a meeting with government officials this week, the representatives of the auto industry asked for a one-year period to adapt to the new norms.

The restrictions exacerbate the auto industry’s woes. In addition to a slowdown in sales due to high fuel prices and higher insurance costs, India’s automakers have also been seen a reduction in demand owing to a drying up of credit options for distributors and customers following the liquidity crisis.

The central government’s import restrictions, which were announced in June last year, mainly relate to high-grade steel. Under the order, foreign steelmakers exporting high-grade steel to India will have to get a certification from the Bureau of Indian Standards (BIS).

Given that it is expected to take around six months to get the necessary certification and approvals, the restriction will cause a delay and subsequent slowdown in imports of high-grade steel, which is an important supply component in cars and car parts like engines.

The carmakers explained that domestic steelmakers did not have the capacity and ability to meet their demand for high-grade steel, and it would take most of them a few years to produce specialised grades of steel. The ruling will reportedly affect a fifth of the steel the Indian auto industry imports, thereby disrupting overall production volumes in the short term.

The government had originally extended the implementation date for the new import curbs by two months to 17 February. The order was envisioned as a way to revive the prospects of domestic steelmakers, who have been reeling under a huge debt burden and unable to compete on prices and quality with steelmakers from China, Japan and South Korea.

While the meeting between government officials and domestic carmakers failed to produce any concrete outcome, the government might not have any choice but to budge. As it prepares for general elections, the government will do what it can to keep the auto industry chugging along.


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