Auto sector stares at a fresh tailwind | Economic Times

Amind a lingering semiconductor shortage & rising steel prices, the auto sector is now faced with another tailwind, i.e., surging aluminium prices.Since April 2020, aluminium prices have more than doubled. Analysts say auto companies face additional pressures alongside semiconductor shortage and steel price pressures. "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," JATO Dynamics' president Ravi Bhatia opines.India Ratings & Research associate director Shruti Saboo points that the content of aluminium in automobiles has increased over the years in order to improve fuel efficiency and make the vehicles lighter. Magnesium, which is a key component for aluminium alloys used to make critical auto parts like gearboxes, seats & fuel tank lids is facing a shortage. This shortage was triggered by the recent power crisis in China, where around 85% of the magnesium originates. Its stocks are already at a low in US & Europe, triggering fears of car production being hit by this shortage as global tier-I parts makers take a supply knock.Auto analysts are already flagging this new problem globally.