Consumers who generally wait for Diwali to purchase new vehicles at attractive discounts and other freebies may be in for disappointment this year. With the shortage of semiconductors, almost all major passenger vehicle manufacturers have resorted to production cuts, which has led to long waiting for popular models. As a result, manufacturers and dealers are in no position to offer attractive discounts this Diwali.
Sales around Diwali generally referred to as festival season sales, are big for automakers as around 30% of their annual sales happen around this period. However, supply-side constraints are going to play spoilsport now.
Auto dealers had last month stated that retail sales during the festival season are going to be lacklustre because of chip shortage, which has slowed down the supply of popular models. They had said the inventory of variants that are in demand, such as Baleno, Ertiga, Brezza, Creta, etc, is continuing to dip. In fact, the inventory is the lowest this time compared to other years. Normally, dealers stock huge inventories of more than a month in the run-up to the festival months.
“With manufacturers 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,” the dealers have said.
Manufacturers and dealers said whatever little discounts will be on offer would be on some entry-level models, where the offers are anyway not very attractive since the prices are comparatively low. Basic entry-level models do not have many electronic components so chip shortage has not affected their production in a major way.
The wholesale despatches (factory to dealers) of passenger vehicles by Maruti Suzuki India, Hyundai Motor and Mahindra and Mahindra (M&M) were severely hit in September due to the ongoing shortage of semiconductors. The month of August also saw similar shortages and indications are that trend of subdued sales will continue, at least till December.
During September, Maruti registered a steep fall of 56% on a year-on-year basis in sales of passenger vehicles in the domestic market at 66,415 units. The second-largest passenger vehicle manufacturer, Hyundai Motor India, which was able to post low single-digit growth till August, also slipped into the negative in September. Its domestic sales saw a 34% y-o-y decline at 33,087 units.
Though the full sales picture for September will emerge during the second week of the month when the Society of Indian Automobile Manufacturers releases comprehensive numbers, going by initial estimates, passenger vehicle sales could see a year-on-year decline of around 43%.
The use of semiconductors in the auto industry has gone up globally in recent times, with technological advancements and new models coming with 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.
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