Spend Less in an Auto-Component Plant: Scrap, Sorting, Tooling, Energy and Overtime (₹, India)
How do you reduce manufacturing cost in an Indian auto-parts plant? Per MoSPI's ASI 2023-24 (checked 20 Oct 2026), materials take 65.3% of the industry's output and net profit 8.3%, so 1% less material wasted adds about 8% to profit. In a ₹120 crore plant, six moves on scrap, sorting, tooling, energy and overtime are worth ₹1.3–1.9 crore a year.
Last checked: 20 Oct 2026
By the Mama Editorial Team, for owners of Tier-2 and Tier-3 machine shops, press shops and forges. A companion page covers selling more of the machine hours you already pay for; this one covers money that never becomes good parts.
Key takeaways
- Material is the lever. Per ASI 2023-24 (NIC 293), materials are 65.3% of output, wages 8.3%, fuel and electricity 2.3%, net profit 8.3%.
- Scrap costs profit, not just steel. Every point of rejection burns material worth roughly 0.65% of sales, close to 8% of average profit.
- One customer complaint can cost ₹2–5 lakh in our worked PPM example.
- Energy matters most in forging and casting. Fuel and power are 5.4% of output in forging and stamping and 5.6% in casting, against 2.3% for parts makers overall (ASI 2023-24).
- Government money exists for forge and foundry energy work: BEE's ADEETIE runs to FY 2027-28 for forging and foundry clusters.
- Overtime costs double under OSH Code, 2020, s.27, as in any industry.
Where an auto-component plant's money goes
The Annual Survey of Industries is MoSPI's yearly census of registered factories. For NIC group 293, "Manufacture of parts and accessories for motor vehicles", the 2023-24 survey counts 5,753 factories, 10,37,635 persons engaged and ₹5.50 lakh crore of total output (MoSPI ASI API, NIC 293, 2023-24).
The average factory in operation (5,030 of them) produced about ₹109 crore and engaged about 206 people (our division).
The MoSPI ASI API returned no NIC 293 rows for 2024-25 (checked 20 Oct 2026), so 2023-24 is the latest year.
| Cost line (ASI 2023-24, NIC 293) | ₹ lakh crore | Share of output (%) | ₹ crore in a ₹120 crore plant (assumed same mix) |
|---|---|---|---|
| Materials consumed | 3.59 | 65.3 | 78.4 |
| Other inputs (repairs, contract work, services and other expenses) | 0.65 | 11.7 | 14.1 |
| Wages and salaries incl. bonus and employer contributions | 0.46 | 8.3 | 10.0 |
| Fuel and electricity consumed | 0.13 | 2.3 | 2.8 |
| Depreciation | 0.15 | 2.8 | 3.4 |
| Interest paid | 0.06 | 1.2 | 1.4 |
| Net profit | 0.45 | 8.3 | 9.9 |
Source: MoSPI ASI API as above. "Other inputs" is ASI total inputs minus materials and fuel. The ₹120 crore column is an assumption; replace it with your own P&L.
Materials dwarf wages. In NIC 293 materials are almost eight times the wage bill (ASI 2023-24), so 1% less material lost beats a 5% wage cut.
Electricity is most of the energy bill. Electricity was 78% of the ₹12,838 crore fuel bill of NIC 293 in 2023-24, and the industry paid an average of ₹8.68 per kWh (our division of ASI value by ASI quantity).
Most workers come through contractors. Of 8,51,924 workers in NIC 293, 5,04,424 (59%) came through contractors in 2023-24 (ASI), so overtime and attendance sit partly in someone else's register. Parts waiting between machines are cash too: see WIP between operations.
For the full set of industry numbers by state, see Indian auto-component plants by the numbers.
Six moves, priced for a ₹120 crore Tier-2 plant
Every ₹ figure below is an assumption unless a source is named. The plant: ₹120 crore of sales, about 230 people, machining and pressing, ASI cost mix.
| Cost line | Move | ₹ effect per year (assumed) | Cost to do it (assumed) | Payback | Source for the base | Government support |
|---|---|---|---|---|---|---|
| In-house scrap and rework | Cut rejection by 1 point: first-off and patrol checks on time, tool-change records, poka-yoke on the top 3 defects | ₹55–80 lakh | ₹8–15 lakh | 2–3 months | Materials 65.3% of output (ASI 2023-24); IATF 16949 clause 10.2.4, error-proofing, is 7th among minor audit findings worldwide (VDA QMC, 23 Apr 2026) | MSME Lean; ZED (printed validity to 31 March 2026) |
| Customer sorting and escalations | Halve escalations and shrink the suspect window with timestamped records | ₹5–10 lakh | ₹2–5 lakh | under 6 months | ₹2.4–4.9 lakh per escalation (worked example; assume 4 a year) | none found |
| Handling and transit damage | Racks, separators, no metal-on-metal stacking | ₹5–10 lakh | ₹5–10 lakh | 6–12 months | Assumed; see the dents and scratches page below | none found |
| Tooling (inserts, taps, dies) | Track tool life per part number, regrind on schedule, stop early changes | ₹15–25 lakh | ₹3–8 lakh | 2–4 months | ASI does not split tooling out (checked 20 Oct 2026) | none found |
| Energy | Compressed-air leaks and pressure, idle machines off, furnace controls | ₹28–40 lakh | ₹10–25 lakh | 4–10 months | Fuel and power 2.3% of output (ASI 2023-24) | ADEETIE for forging and foundry clusters |
| Overtime | Plan the load, move habitual overtime into a shift or a better schedule | ₹20–25 lakh | planning time | immediate | OSH Code s.27: twice the rate of wages | none |
| Total | ₹1.3–1.9 crore | ₹28–63 lakh |
Against ₹9.9 crore of net profit at the ASI average margin, that is a 13–19% rise in profit without one extra order.
Scrap and rework: the 65% line
A rejected part loses its material and all the work already spent on it. At the ASI mix, one point of rejection on ₹120 crore of sales burns about ₹78 lakh of material a year. Assume the scrap dealer pays back about 30% of the material value, and the net loss is about ₹55 lakh before conversion cost.
Most of it is lost in the first hours after a process drifts: a worn insert, a die set slightly off, a broken tap. The saving is in catching drift sooner, not more final inspection.
The worked numbers for a machine shop are in what a 3% rejection rate really costs, and the rework cost calculator takes your own rates.
A neighbouring leak: brass chips going out with the scrap dealer.
Customer sorting: the bill that grows with the suspect window
A complaint from the OEM or Tier-1 is priced by the customer's supplier manual, not by your part price. MANN+HUMMEL's published controlled-shipping instructions want a signed reply and an 8D started within 24 hours, and if CSL parts arrive unlabelled, 100% sorting at its location at the supplier's expense (CSL1/CSL2 instructions, April 2014).
In our worked example, six bad brackets worth ₹270 led to about ₹2.4 lakh of cost with a month of in-house controlled shipping, and about ₹4.9 lakh with a third-party wall. The line-by-line build is in what a PPM escalation costs, and the customer PPM escalation calculator prices your own case.
The variable part scales with how many parts are suspect. If you can show when a tool broke and when it was caught, the customer sorts one shift's output instead of a month's. Handling damage is priced in dents and scratches from stacking.
Tooling: the line nobody totals
None of the MoSPI ASI API's 56 indicators for NIC 293 reports tooling separately (checked 20 Oct 2026); inserts and dies sit inside materials or other inputs.
Assume a machining-and-pressing plant spends 1.5% of sales on inserts, drills, taps, punches and die maintenance: about ₹1.8 crore a year at ₹120 crore. Two common habits waste it: inserts changed early "to be safe", and dies run past their regrind interval until a burr forces a stop.
Assume tracking tool life per part number against pieces made recovers 10–15% of that spend: ₹15–25 lakh a year. Die changes on presses are a separate cost, covered in die change time on power presses.
Energy: small for machining, large for forging and casting
For the average parts maker, fuel and electricity are 2.3% of output (ASI 2023-24, NIC 293). A 10% saving on ₹2.8 crore is ₹28 lakh: real, but not the first lever.
Forges and foundries are different. Fuel and electricity consumed were 5.4% of output in NIC 2591, forging, pressing and stamping, and 5.6% in NIC 243, casting of metals, in 2023-24 (MoSPI ASI API, NIC 2591; NIC 243). For a ₹120 crore forge, that is about ₹6.5 crore a year.
| Process (TERI cluster profiles for SIDBI, 2012) | Energy per tonne | Where the saving is |
|---|---|---|
| Foundry, induction furnace unit, Kolhapur | 1,000–1,200 kWh per tonne of good castings, of which 600–700 kWh for melting | Melting is about 70% of energy use |
| Forging, electric induction billet heater, Pune | 450–500 kWh per tonne | Heating is 80–90% of a forge's energy |
| Forging, oil-fired furnace, Pune | 100–200 litres per tonne | Efficient induction instead of old oil-fired furnaces: 30–70% saving |
| Heat treatment, oil-fired, Pune | 60–80 litres per tonne | Efficient gas-fired furnaces: 10–20% saving |
Sources: TERI, Cluster Profile Report – Kolhapur Foundry Industry, 2012; TERI, Cluster Profile Report – Pune Forging Cluster, 2012. The Pune report also lists 5–15% savings from compressed-air controls and VFD screw compressors.
In a foundry, scrap and energy are one problem: a rejected casting has already used its melting energy, so a foundry with 8% rejection melts about 9% more metal than it sells.
BEE's ADEETIE scheme names forging and foundry among its 14 sectors in 60 clusters. It offers 5% interest subvention for micro and small units and 3% for medium units on loans of ₹10 lakh to ₹15 crore, and reimburses an investment-grade energy audit and project report up to ₹75,000 (micro and small) or ₹1 lakh (medium), for projects that sustain at least 10% energy savings, FY 2025-26 to FY 2027-28 (BEE ADEETIE page, checked 20 Oct 2026).
Demand charges are in power bill up, output flat, idle machines in the energy bill cameras can explain; the energy per unit calculator puts kWh against pieces, and the idle machine energy calculator prices standby.
Overtime: the 2× line
This line reads the same in any industry, so it comes last. The Occupational Safety, Health and Working Conditions Code, 2020, s.27, says overtime is paid "at the rate of twice the rate of wages", calculated daily or weekly, whichever favours the worker (OSH Code, Gazette of India). The Code took effect on 21 November 2025 (S.O. 5321(E)) and repealed the Factories Act, 1948 under s.143; for a factory, your state makes the working rules under the Code.
ASI 2023-24 shows wages and salaries of workers in NIC 293 of ₹19,790 crore for 8,51,924 workers, or about ₹19,400 a month per worker before bonus and employer contributions (our division).
Overtime is paid on wages in the Code's sense, basic plus DA. Assume ₹15,000 a month for an operator; check your state's current minimum-wage notification. One overtime hour then costs about ₹144 (2 × ₹15,000 ÷ 26 days ÷ 8 hours). Sixty operators doing 40 overtime hours a month cost about ₹41.5 lakh a year. Moving half of it into planned shift hours saves about ₹20 lakh.
Your state sets the quarterly ceiling, and overtime needs the worker's consent. See is it the work or the habit, Sunday overtime or a second shift and the overtime cost calculator.
What cameras can and cannot tell you here
Cameras see time and flow: when a machine stopped, a tool was changed or parts waited.
Cameras cannot see a burr, a missing thread, hardness or a dimension out of tolerance, and they do not read a kWh meter or tool wear. Scrap needs inspection records, energy needs meters, tooling needs a tool-life log.
The overlap is the clock: with the camera timeline and the inspection log on one clock, a complaint can be dated to the hour.
Where Mama fits
Mama reads a plant's existing cameras and each morning tells the owner where machine hours leaked yesterday. It watches machines and flows, not named operators. To see which of the six lines is largest in your plant, leave an email or phone in the form below and Mama will get back to you with a camera plan.
FAQ
What share of an Indian auto-component plant's cost is material? In MoSPI's ASI 2023-24, materials consumed were 65.3% of total output for NIC 293, parts and accessories for motor vehicles, against 8.3% for wages and 2.3% for fuel and electricity.
What is the cost of poor quality for an auto-parts supplier? In-house scrap and rework, plus sorting, line-stop charges, incident fees, premium freight and controlled shipping at the customer. In our worked examples, one complaint cost ₹2.4–4.9 lakh, and one point of rejection costs a ₹120 crore plant ₹55–80 lakh a year.
How much energy does a forge or foundry use per tonne? TERI's 2012 cluster profiles for SIDBI give 1,000–1,200 kWh per tonne of good castings for Kolhapur induction-furnace foundries and 450–500 kWh per tonne for induction billet heating in Pune forges.
Is there a government scheme for energy saving in auto-component plants? For forging and foundry units in BEE's 60 clusters, ADEETIE offers 3–5% interest subvention and an audit refund to FY 2027-28. The ZED and Lean guidelines print a validity to 31 March 2026; no extension order was found on msme.gov.in or dcmsme.gov.in (checked 17 Oct 2026).
Is overtime still paid at double rate under the Labour Codes? Yes. OSH Code, 2020, s.27 sets overtime at twice the rate of wages, and the Code on Wages, 2019, s.14, says not less than twice the normal rate. The quarterly ceiling is set by your state's rules.