Auto sector is already reeling from the semiconductor chip shortage and the hike in steel prices. Now, it looks like there is going to be another headwind in the way of its progress.
Aluminium prices keep surging amidst the already heavy pressures faced by the auto sector. Since the April of 2020, aluminium prices have not gone down but have more than doubled.
“Shortage of aluminium is going to be the real challenge. The availability of ships for material transportation adds to the problem. Given the supply constraints and logistical challenges, vehicle prices may take 16-18 months to adjust,” said JATO Dynamics’ president Ravi Bhatia.
According to Shruti Saboo, India Ratings & Research associate director, the content of aluminium in automobiles has increased over the years in order to improve fuel efficiency and make the vehicles lighter.
A key component for aluminium alloys, Magnesium is used in manufacturing critical parts like gearboxes, seats and fuel tank lids. The shortage of Magnesium was triggered by the recent power crisis in China, where around 85% of the magnesium originates.
Magnesium stocks are deficient in US & Europe, already hitting the production companies hard. Let us hope this doesn’t knock down the auto industry any further.