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Steel cos gain from car makers' bid to localise

July 23, 2009 10:13 IST

Indian steel has begun to find favour with foreign car makers gearing up to increase localisation in a bid to pare costs and beat currency blues.

Honda Siel Cars India is planning to source steel from India for its local operations and is in talks with Tata Steel. A Tata Steel spokesperson confirmed that the companies were in discussions.

Currently, Honda sources steel plates from Thailand for its Greater Noida facility. Honda models, like the City and Civic, have 74 per cent localisation, while the newly launched hatchback, Jazz, has 77 per cent local content.

"We are looking at increasing localisation in popular high-volume models like the City, where it could go up to around 80 per cent," a Honda spokesperson said.

She added that Honda required a specific grade of steel for its Advanced Compatibility Engineering Body and G-CON (G-Force Control) technology that provides high integrity survival in case of crashes. This light-weight yet highly tensile variety of steel was not available in sufficient quantities in India, the company said.

Another car major, Ford India, has plans to increase its steel sourcing to nearly five times from the current levels of 20 kilotonnes, as it enters the volume segment with the small car slated for launch in the first half of 2010. It currently sources automotive cold-rolled (CR) & hot-rolled (HR) grades from Tata Steel.

Tata Steel is also a vendor for Maruti, Hyundai, Nissan and Volkswagen. Not surprisingly, more than 55 per cent of the steel maker's ongoing expansion would be in the flat products, used by the automobile sector, by 2010-11.

For the steelmakers, gaining acceptance from the car makers is a move up the quality ladder. Not just Tata Steel, JSW Steel and Essar Steel have also got approvals from some of the MNC car companies and are awaiting approvals from others.

Vikram Amin, executive director (sales & marketing), Essar Steel, said: "All our efforts are directed towards becoming a preferred steel supplier to the auto industry"

Auto grade steel is a focus area for Essar Steel. Currently, 20-25 per cent of Essar's total production is sold to the auto industry. Newer grades are being developed to meet the discerning demand of this industry. Essar Steel has an umbrella agreement with Kobe Steel, Japan to develop steel of speciality grade for the auto industry.

In order to cater to JIT ('just in time') delivery needs of the auto industry, Essar Steel has set up service centres in three auto hubs — Pune, Chennai and Bahadurgarh.

JSW Steel has a technical tie-up with ThyssenKrupp of Germany for high-end cold-rolled steel. The company set up a 1-million-tonne cold-rolled mill last year, which has been ramped up by 70 per cent.

Jayant Acharya, director (sales & marketing), JSW Steel, said the norms were stringent and approvals took time. "Our facility is geared for auto steel," he said.

Talking on cost advantage of sourcing the commodity locally, Sandip Sanyal, executive director (operations), Ford India, said: "Steel is a dynamic commodity and it's difficult to quantify cost advantages as it is based on global trends. However, the key advantages, of local sourcing would be reduction of levels in the value chain and minimising exposure to foreign exchange fluctuations."

Toyota Kirloskar Motors, a joint venture between Toyota Motor Corporation of Japan and Kirloskar Group, confirmed that it sourced around 70-75 per cent of its net steel requirement as it helped avoid exchange rate fluctuations.

Sohini Das & Ishita Ayan Dutt in Kolkata
Source: source