Auto Industry Faces Supply Issues With Semiconductor Shortage Ahead Of The Festive Season.

August marks the beginning of the festive season in India, With Onam and Varamahakshmi. The Indian Auto sector that has been seeing a strong rebound in sales in the last three months, is expecting good numbers during the festive season. While the industry is still battling with the disruption caused by the pandemic, semi-condutor shortage and rising commodity prices are playing spoil sport.

In July we saw passenger vehicle segment sales going above the pre-pandemic levels of 2019, with two-wheelers a few thousand units behind the 2019 level. The global semiconductor shortage and steep rise in commodity prices and now impacting the festive season prospects of the Industry. While the demand is high, companies are not able to supply due to shortages.

Maruti Suzuki India’s largest carmaker posted sales of 68,184 mini-mid size passenger vehicles in August, compared to 82,888 units in August last year. Total Passenger Vehicle Sales for the company stood at 105,775 units in August compared to 115,325   in the same month last year. “Sales volume of the Company in August 2021 was affected due to electronic components shortage. The Company took all possible measures to limit the adverse impact. “ said Maruti Suzuki in a statement. 

In early August, Suzuki Motor Gujarat, which supplies cars exclusively to Maruti Suzuki, had to scale down production to a single shift at some manufacturing lines in the plant. "Owing to the semiconductor shortage situation, the company has been informed by its contract manufacturing company, SMG, that production will be partially impacted in this month," Maruti Suzuki said in a regulatory filing at the time.

While other Auto OEMs are in the green in the month of August, the Semiconductor shortage is slowly affecting everyone, Mahindra & Mahindra in an exchange filing said that there will be a 20-25 percent dip in production volumes of its automotive division in September as it faces shortages of semiconductors. Consequently, Mahindra will shut its plants for seven days this month. The company said revenues and profits will be impacted in line with the fall in production volumes. 

Tata Motors saw a growth of 51% in the month on a year-on-year basis, though the company has seen deliveries go down 7% on a month-on-month basis due to shortages. In a statement released to the media, the company said “Semiconductor shortage continues to impact the auto industry globally. The recent lockdowns in East Asia have worsened the supply situation and hence Tata Motors is forced to moderate production and offtake volumes in the coming months.” Tata Motors is trying to engage with extended supply chain partners, procuring chipsets from the open market, using alternate chips and manage the model and trim mix to mitigate the risk.

The two-wheeler segment is impacted as well, Honda 2Wheelers registered a 3% decline in y-o-y figures while posting an 18 % sales growth when compared to last month. Similarly Bajaj Auto registered a sales decline of 11%.