Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do. There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Now as I approach my 90th birthday ( 27 June 2023 ) , I invite you to visit my Digital Avatar ( www.hemenparekh.ai ) – and continue chatting with me , even when I am no more here physically

Wednesday 14 February 2018

Car Grave-Yard of World ?





BACKGROUND :


Countries all around the World, are in the process of phasing out Petrol-Diesel vehicles and switching over to Electric vehicles


Here are the target dates ( for change-over ) set , for some of the countries :

·         UK………………. 2040

·         Scotland…….. 2032

·         France………..  2040

·         Norway……….  2025

·         Austria……….   2025

·         Netherlands.   2030

·         China……….     2030

·         Finland…….     2030

·         India……….      2030


Now an electric vehicle has only 20 parts against 2000 parts in a Petrol-Diesel vehicle



With switch-over to EV , following parts will be no longer needed :

Engine – Transmission – Brake – Clutch – Levers – Fuel Injection system – Exhaust System – Lead Acid Battery – Pedals – Dashboard Instruments – some Wiring
  etc



These parts will get replaced by :

Lithium-ion Battery – Electric Motors – Sensors – Electronics – Computers etc




================================


IMPLICATIONS :


·         Thousands of companies manufacturing components for Petrol – Diesel vehicles , will go out of business .


·         These include , Foundries , Forge-Shops , Machine Shops , Fabrication Shops , Sub-Assembly Shops , Electroplating Shops, Heat Treatment Shops , Wiring Harness Units etc


·         Currently , Indian Auto Component industry employs some  25 million people  ( directly and indirectly ) and contributes 7 % of our GDP


·         These Auto Component manufacturers are worried !  Over the next 10 – 20 years, no one will need to buy these current components .



·         A few hundred Auto Component manufacturers will , no doubt , switch over to manufacture of components required by Electric Vehicles but that is only 20 parts ( as against 2000 parts required currently ) .


     What will / can , thousands of the rest do to survive ?



================================



MY  SUGESTION :


·         In order to survive, they need to ask themselves ( ala Ted Levitt’s seminal essay , “ Marketing Myopia “ ) :

  What business are we in ?


Instead of considering ourselves as being in the business of  Auto Components Suppliers “ to vehicle manufacturers, could we think of being in the business of

  
     CAR  GRAVE-YARDS  of  the WORLD ?


===============================


WHY  THINK  SO ?


·         World Scenario :


#  Car population    ( 2010 )………………………………………………….. 1  Billion

#  Car population    ( 2017 ) ……………………………………………………2  Billion


#  Cars manufactured in 2011……………………………………………….  80  Million

#  Manufacturing Target for 2035 ……………………………………….   127  Million


·         India Scenario :

#  Vehicle Population ( 2016 )……………………………………………. .  230  Million

#  Vehicle Population ( 2037 )……………………………………………….. 500  Million


( Source :




#  Passenger Vehicles produced in 2016-17…………………………    3.7  Million


#  Total Vehicles produced in 2016-17…………………………………… 25.3  Million



==============================



HOW  MANY  NON-EV  GET  SCRAPPED  NOW  EACH  YEAR  ?



·         USA ………………………………… 15  million

·         Europe…………………………..    9  million

·         Japan……………………………..   6  million

·         China……………………… ……..   6  million



·         Developed Countries……….. 30  million ( generating 27 million tons of scrap )


·         India………………………………..   4  million


( Transport Ministry wants to scrap immediately , some 28 million petrol-diesel vehicles which are older than 15 years , for which proposed tax exemptions are :


#  Rs  30,000 for passenger vehicles / Rs 150,000 for Commercial vehicles )





=============================





THIS  IS  ABOUT  TO  ACCLERATE :


·         But , if entire World wants to switch over to Electric Vehicles in nest 20 years, then the number of Petrol – Diesel vehicles to be scrapped could well be 200  Million per year !


Of this , India should target to capture a 25 % market share , at 50 million vehicles per year ( inclusive of scrapping of our own old vehicles )


    ( Current population + new Petrol-Diesel Vehicles that will continue to get
      manufactured in next 20 years )



·         In India alone, that figure could be as high as 20  Million per year for next 20 years ( - as compared to current level of 4 million ) !


=================================


WHERE  IS  THE  OPPORTUNITY  HERE  ?


·         Car scrap/recycle yards around the World, just do not have the capacity to scrap / recycle 200 Million vehicles per year ( - a 7 FOLD jump from current 30 million )


·         In any case , car scraping / recycling is considered a “ dirty business  “ in developed countries


·         In developed countries , labour costs are very high ( as much as 20 – 30 times of prevalent labour costs in developing countries ), making this industry , a “ high cost “ industry


·         That forces scrap Yards in developed industry to employ high level of expensive / automatic machineries ( scrappers / crushers / balers / sorters / grinders etc )


·         As against this , Indian scrap yards employ simple electric hand-tools and cheap labour , making them very competitive against scrap yards abroad


==================================



IS  THERE EVIDENCE TO  SUPPORT THIS  THINKING  ?


·         Take the example of ALANG SHIP BREAKING YARD in Gujarat , with following figures :


#   A small town ( population of 18,464 ) near Bhavanagar , Gujarat



#   Alang Ship breaking yard set up on a 6 mile beach in 1983




#   180  Ship breaking companies employing 40,000 direct workers and 200,000
     indirect workers , who work 12 hours per day for Rs 400 per day ( or less ),
     as compared with a Semi-Skilled worker in USA getting Rs 11,000 per day ( $
     170 per day - $ 850 per week for a 40 hour week )



#   Alang companies generate revenue of Rs 6,000 cr / year and pay tax of Rs
    2,000 crore to government


#   Breaks 60 % of World’s “ Ships to be broken “ ( 29 million tons in 2013 )


#   Broken 7,000 ships till date


#   As many as 200 ships lining up for breaking at any given time


#   10 % of all steel consumed by India comes from Steel Scrap from ALANG


#   No doubt working conditions at ALANG are miserable / safety standards are
    sadly woeful / labour laws are flouted. All of these need big improvements



#   For the past few years , Shipping Industry has witnessed a downturn,
     rendering ALANG under-utilized



=============================


WHAT  SHOULD  BE  THE  NEXT  STEP ?



·         Start a new initiative called “  Break  In  India


·         Set up 100 Alang type “ CAR GRAVE YARDS “ all along the vast Indian coast , as part of already announced Coastal Economic Zones (CEZs), Coastal Economic Units (CEUs) and Port-Linked Industrial Clusters




     Each Car Grave Yard to house 100 Car Braking Units ( total of 10,000 units )



     Each unit would have ( mandated ) minimum scrapping capacity of 5,000 vehicles
     per year , aggregating 50 million vehicles per year ( our 25 % market share )


    

·         “ Break In India “  must find meticulous / detailed, implementation schedule in :


#   EV  Road  Map  ( Policy Document awaiting Cabinet approval )


#   Automotive Mission Plan 2016-26   ( AMP 2026 )



·         Exempt CAR  BREAK YARDS from payment of Corporate Income Tax for next 20 years


·         Encourage existing Auto Components units to set up such “ Car Break Yards “ by offering to them , free land ( in those CEZ ) and free electricity


·         From world over, encourage “ Cars to be Scrapped “ to get loaded onto “ Ships to be Scrapped “ and brought to these CEZ .


      After unloading , those ships to be re-directed to Alang !


Foreign Ship Owners can make money ( by hauling cars to India ), even in the last journey !



·         Permit 100 % FDI ( automatic route ) in Car Breaking Units . This will help bring latest technology, safer working conditions and high productivity . It will also raise the wage levels


·         There should be no “ Import Duty / Customs Duty “ on cars imported for breaking


·         GST on sale ( domestic or export ) of salvaged materials should be only 5 %


==============================================


BENEFITS  :

·         25 million persons currently employed by Auto Component Industry will be able to retain their jobs ( - of course , they must agree to be re-trained / re-skilled , in order to save their jobs )



·         Cost of our STEEL MANUFACTURING by Indian Steel plants will go down since they will get 45 Million tons of Steel scrap ( from those 50 million cars ) at very low input cost



The price of iron and steel has increased from Rs 30,000 per tonne 6 months ago to about Rs 48,000 to Rs 50,000 per tonne today without any such steep hike in input costs.


( Source :





·         We will be able to salvage / recycle metals ( Grey Iron / Steel / Aluminium / Lead and precious metals such as Nickel – Copper – Cobalt etc )


===============================


I urge our Policy Makers  / PM-EAC / NITI Aayog /  Industry Associations ( ASSOCHAM – FICCI – CII - SIAM – ACMA ) to consider my suggestion





15  Feb  2018




===================================================================================

Added  on  09  June  2023 :

India is must increase the volume of vehicle scrap used in steel making in a bid to lower carbon emissions, Minister for Steel Jyotiraditya Scindia said Wednesday. 

Responding to queries from ET, he also said that instances of domestic steel industry facing injury due to imports have been flagged to him.


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