The ongoing global semiconductor shortage has hamstrung Indian auto firms, which are mostly reporting lower sales during the festive season. Although demand had been showing signs of revival after Covid-19 restrictions were lifted, the car dealers have been hamstrung by supply-side constraints as vehicle despatches from the factories have fallen due to the chips shortage.
Cars have become increasingly dependent on chips – for everything from computer management of engines’ fuel economy to driver-assistance features such as emergency braking. The carmakers were forced to shut down plants last year due to the Covid-19 pandemic, but they now face increasing competition from the consumer electronics industry for chip deliveries.
Shipments of passenger vehicles by Maruti Suzuki, Hyundai Motors and Mahindra and Mahindra were hit in October due to the ongoing global shortage of semiconductors. It is clear by now that the slowdown will continue for a long time.
Maruti Suzuki has said that the production cut will continue. India’s leading carmaker had operated its plants at 60% capacity in October and in September it had produced only 40% of its total capacity.
Many of these companies have been facing this crunch since August. Rival Hyundai India too has also been reporting lower sales due to chip shortage. It had slipped into the negative in September and the same happened in October. Its domestic sales saw a 35% yearly decline to 37,021 units in October. It is said that global semiconductor supply constraint continues to be a challenge resulting in lower production across the industry.
Mahindra & Mahindra saw a decline of 8.5% in total sales to 38,734 units. The company claimed that the demand for some of its new models was robust but the company is facing supply chain issues regarding semiconductor-related parts.
This fall in production, coupled with the rising demand is expected to increase the waiting period for cars, which currently ranges from 1.5-7 months. This will force automakers to sell lower numbers of vehicles despite good demand. Dealers too will be reluctant to offer any discounts or freebies.
While the semiconductor shortage has not heavily impacted the two-wheeler sector, the demand continues to be subdued as the second wave of Covid-19 had dealt a body blow to rural incomes and the economy. Semiconductors in two-wheelers are mostly used in their high-end models.