Chip shortage: October auto sales stay in the slow lane

Production cuts continue in November.

Chip shortage: October auto sales stay in the slow lane
The low despatches are also the result of production cuts by companies, which began in August

Wholesale despatches of passenger vehicles by automakers like Maruti Suzuki India, Hyundai Motors and Mahindra and Mahindra (M&M) were once again hit in October due to the ongoing global shortage of semiconductors. It is clear by now that the slowdown will continue for a long time to come and Diwali sales will be subdued due to supply side constraints.

The low despatches are also the result of production cuts by companies, which began in August. In fact, Maruti has said that the production cut will continue in November also when it is expected to be 85% of the normal production. Hyundai said on Monday that the global semiconductor supply constraint continues to be a challenge resulting in lower production across the industry.

Though the two-wheeler industry does not get that heavily impacted by the semiconductor shortage as electronic items are mostly used in their high-end models, but their domestic demand continues to be subdued as rural demand has been hit due to loss of income post the second wave of Covid 19.

However, improving freight availability is aiding the revival of sales of commercial vehicles, which led both Tata Motors and Ashok Leyland post growth in numbers during the month.

During September, Maruti registered a steep fall in passenger vehicle sales in the domestic market, which fell 32.4% on a year-on-year basis to 112,788 units. Hyundai Motor India, which was able to post a low single-digit growth till August, slipped into the negative in September and the same happened in October also. Its domestic sales saw a 35% y-o-y decline to 37,021 units.

Tata Motors’ total wholesales increased by 30% to 67,829 units. The company’s total despatches stood at 52,132 units and its domestic sales increased by 31% to 65,151 units. The company’s passenger vehicle sales in the domestic market stood at 33,925 units in October, up 44%. Commercial vehicle sales in the domestic market stood at 31,226 units, up 20% on a y-o-y basis.

Mahindra and Mahindra saw a decline of 8.5% in total sales to 38,734 units. “Demand for vehicles across our product portfolio remains robust. We have received an unprecedented response for the XUV700 and, as per our commitment, we have commenced deliveries of the petrol variant to customers. The supply chain issues around semiconductor-related parts continues to be dynamic as we focus on managing the situation in the short term,” Veejay Nakra, CEO, automotive division, M&M, said.

Sales of Toyota Kirloskar remained flat at 12,440 units, a growth of 0.5%. “Demand in the market has been robust in the last few months and this can be attributed to various factors, besides pent-up demand. Customer orders too have been on a constant rise, restoring normalcy in demand trends when compared to pre-Covid times,” Wiseline Sigamani, associate general manager, sales and strategic marketing at TKM, said.

Pick up in economic activity continued with commercial vehicle manufacturer Ashok Leyland selling 13% more vehicles in October compared to same month last year. The company sold 10,043 units during the month.

Among the two-wheeler firms, both TVS Motor and Bajaj Auto reported a double-digit decline. While TVS Motor reported a 14% drop in domestic sales, Bajaj Auto saw a 26% drop.

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