Long road ahead for car buyers this festive season

The festive season demand would remain strong, but the challenge of fulfilling that demand is coming from chip shortage.

By:October 17, 2021 9:48 AM
A customer looks at a car at a Maruti Suzuki dealership (Image for representational purposes only)

Limited supply and rising demand have led to a long waiting period, running into months, for popular passenger vehicle (PV) models like Mahindra Thar, Hyundai Creta, and Kia Seltos.

According to the Federation of Automobile Dealers Associations (Fada), the waiting period for the Thar diesel variant is nine-11 months; for Thar’s petrol variant, it is three-four months; for both Creta and Seltos, four-six months; for Toyota’s Innova Crysta and Fortuner, five-six months; and for most other models, around two-three months. Maruti Suzuki’s CNG cars have a waiting period of about four months.

In these models, top-end variants can have longer waiting periods, and entry-level ones shorter, Vinkesh Gulati, president, Fada, told FE.

“At PV dealerships, there is no festive season,” he said, referring to the fact that while demand is strong, there is limited supply to service that demand. “Traditionally, in the run-up to the festive season, dealerships used to keep 30-50 days of vehicle inventory, but this has reduced to just 15-20 days, the lowest during this fiscal.”

Auto analysts FE talked to said semiconductor (chip) shortage will continue to impact PV sales in the foreseeable future.

Saket Mehra, partner & auto sector leader at Grant Thornton Bharat, told FE that purchasing sentiments remain optimistic despite fear of another wave. “Customer enquiries at dealerships are high. Compared to July-September 2020 having sales of 6,70,722 PVs, sales in July-September 2021 are marginally higher (6,81,190 units). But there is a lag in supply as manufacturers are finding it hard to obtain critical components like chips,” he said.

Preetam Mohan Singh, senior vice-president- automotive, Praxis Global Alliance, added that chip shortage has led to manufacturers cutting production by 30-40% in recent months. Maruti Suzuki, for example, cut production by 60% in September. “It’s difficult to quantify the rise or drop in this year’s festive season sales vis-à-vis last year, because chip shortage is an extraneous event. The core nucleus of the semiconductor industry is outside India,” he said.

And then there are unexpected events, like the recent surge in Covid-19 cases in Malaysia (one of the world’s top destinations for assembly and testing of chips), which further add to supply issues. “While the chip shortage is over a year old phenomenon and we have found creative ways of dealing with it, challenges crop up every now and then, like the surge in Covid-19 cases in Malaysia,” Shailesh Chandra, president, Passenger Vehicles Business Unit, Tata Motors, told FE.

“The festive season demand would remain strong, but the challenge of fulfilling that demand is coming from chip shortage.”

In modern cars, chips are used to control almost all functions, and this means even if one chip is missing, a car cannot be operated. From using power windows to power steering, to even acceleration and braking, software codes running on chips make these physical acts possible.

CV Raman, chief technical officer, Maruti Suzuki India, told FE that contemporary cars use chips in almost all functional areas, such as powertrain, body control, steering system, braking systems, airbag system, infotainment and vehicle telematics system, and so on. This usage, Raman said, will only go up with the mass arrival of electric cars.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Latest Auto News