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 )
( Source : http://events.steelmintgroup.com/scrap-recycling-in-india-rise-of-a-new-phase-of-steelmaking/ )
=============================
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
www.hemenparekh.in
/ blogs
===================================================================================
Added on 09 June 2023 :
Responding to queries from ET, he also said that instances of domestic steel industry facing injury due to imports have been flagged to him.