Chip shortage to hit festive auto sales

The auto industry accounts for about 10% of the overall semiconductor demand, with the rest coming from the electronic appliances and gadget industry, such as mobile phones and laptops, among others.

By:Updated: Sep 08, 2021 11:00 AM
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Auto dealers on Tuesday said that retail sales during the festival season is going to be lacklustre because the shortage of semiconductors has slowed down the supply of popular models, especially in the passenger vehicle segment. The dealers said that the inventory of variants which are in demand like Baleno, Ertiga, Brezza, Creta, etc, continues to dip — it is the lowest this time compared to other years — because of supply side problems. Normally, dealers stock huge inventories, of more than a month in the run-up to the festival months.

“Auto dealers are facing the most challenging phase of their business career as Covid-19 after-effect continues to play spoilsport. While until last year, when demand was a challenge, supply is becoming a bigger problem currently due to shortage of semiconductors, even though there is high demand for passenger vehicles,” the Federation of Automobile Dealers Associations (Fada) said in a statement. As reported, so far Maruti Suzuki India, Tata Motors and Mahindra and Mahindra have announced production cuts during the current month because of the shortage of electronic components.

“With OEMs drastically cutting down productions due to unavailability of semiconductors and ABS chips, shortage of containers and high metal prices, customers for the first time may not get a vehicle of their choice and lucrative schemes during this festive season. Ultra-frequent price increase is also keeping entry level buyers at bay,” Fada said. The usage of semiconductors in the auto industry has gone up globally in recent times, with technological advancements and new models coming with more and more electronic features such as bluetooth connectivity and driver-assist, navigation and hybrid-electric systems besides the engine control unit. However, the auto industry accounts for about 10% of the overall semiconductor demand, with the rest coming from the electronic appliances and gadget industry, such as mobile phones and laptops, among others.

As far as retail sales during August are concerned, like last month it again showed improvement across categories, registering an overall growth of 14.48% year-on-year. Compared to last year, sales were higher during the month across categories. In the case of passenger vehicles, sales in August was once again higher – 31.67% — than the same month in 2019, which was a pre-Covid year, according to Fada data. Though on an overall basis sales were still 14.75% lower than that registered during the same month in 2019, the deficit which started narrowing since last month has continued.

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