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The Indian passenger vehicle industry is likely to see its September output fall short by 100,000-110,000 units from previous years — almost double that of last month — due to a shortage of chips. This would translate into a revenue loss of more than $1 billion in potential revenue for this month alone amid high consumer demand, industry insiders said. This is equivalent to around 4% of the total revenue size of Indian passenger car makers.

Vehicle makers are scrambling to secure the last chip available to produce ahead of the key festive season even as pending bookings have swelled to 400,000-500,000 for the industry, insiders said.

This month’s output is expected to be between 180,000 and 215,000 units, which would be the lowest in almost a decade excluding the months when production was curbed due to the national lockdown last year to curb Covid-19 infection.

At the higher end of the estimate, it would be the lowest since June 2013 when production stood at 215,000 units. At the lower end, it would be the lowest since December 2009, data from the Society of Indian Automobile Manufacturers (SIAM) show. In the last four years, carmakers produced 278,000-343,000 units in September. The estimated production this month is likely to be 37% lower than in September 2020. Consequently, carmakers expect their wholesales volume to be around 200,000 units this month.

The country’s leading carmaker Maruti Suzuki earlier this week hinted at a 60% cut in September output. “Though the situation is quite dynamic, it is currently estimated that the total vehicle production volume across both locations could be around 40% of normal production,” the company said, citing supply constraints of electronic components due to the continuing semiconductor shortage across the world.

Mahindra & Mahindra will be producing 25% less as it has announced seven ‘no production days’ in the month. “The company’s automotive division continues to face a supply shortage of semiconductors, which has been further accentuated by the Covid lockdowns in some parts of the world,” M&M said in a filing on Thursday. Others such as Renault-Nissan, Ford and MG continue to operate at lower capacity.

The quarterly output for July to September quarter is likely to be less than 800,000 units, the lowest in 26 quarters barring the Covid-hit first quarter of FY21. Reduced production will hurt channel filling by automakers ahead of the festive period. Carmakers typically increase channel inventory by 10-15 days in September to boost retail sales in October and November.

Ravi Bhatia, president of automotive consultancy Jato Dynamics India, said automakers are struggling as stretched supply chains are unable to respond to the demand recovery.The situation will remain tough for the remaining parts of this year and it’s only towards the last quarter of FY22 that one may see some production recovery. “The semiconductor supply remains challenging and volatility is high,” Bhatia said. “The production loss would be significant… we anticipate the prices of new cars and used cars will begin to increase.”

chip shortage: Chip shortage to cost automakers $1 billion in September revenues

By ariox