Why ArcelorMittal’s Proposed Indian Automotive Steel Joint Venture Is A Good Idea

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ArcelorMittal’s top management recently held discussions with Government of India officials over a proposed $1 billion automotive steel joint venture between ArcelorMittal and state-owned steel company, Steel Authority of India Limited (SAIL). [1] Though ArcelorMittal’s operations are largely concentrated in Europe and the Americas, the company is looking to increase its footprint in India, hoping to cater to the demands of the fast-growing Indian automotive industry. Moreover, the Indian automotive industry will benefit from favorable government support in the years to come, with automobile manufacturing constituting a key thrust area for the Indian government’s ‘Make in India’ program, which is aimed at fostering indigenous manufacturing growth. The Government of India’s Automotive Mission Plan 2016-2026 aims to triple Indian passenger and commercial vehicle production by 2026.

India Automotive

 

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India is currently the fastest growing passenger car market in the world. [2] Passenger car sales are expected to reach 5 million units by 2020, implying an annual growth rate of around 8%. [3] Given the rapid growth expected in the Indian automotive industry and the favorable policy support for the same, Indian demand for automotive steel is expected to rise at robust rates in the years to come. Thus, ArcelorMittal’s plan to set up an automotive steel joint venture with a state owned steel company should enable the company to take advantage of an exciting growth opportunity.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for ArcelorMittal

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Notes:
  1. Meeting to discuss ArcelorMittal and SAIL automotive joint venture, ArcelorMittal News Release []
  2. At 7.64% growth, India fastest growing passenger car market, Mint []
  3. India to be a five million car market by 2020: Maruti Suzuki’s RC Bhargava, Mint []