Auto makers rework shop floor strategies amid stubborn chip shortage

Supply shortage has impacted passenger vehicles sales volumes in October. Lately, a global supply chain shortage of semiconductors has badly impacted automobile production.

However, industry executives said that while there is no certainty how long the shortage will last, they are much better prepared to handle production taking mitigating steps like reduction of chips in cars.

The country’s largest carmaker Maruti Suzuki India (MSI) on Friday reported around 33 per cent decline in sales at 108,991 units in October

The company had sold 163,656 units in October last year,

While the carmaker has said that as per current estimates the total vehicle production volume across both its facilities locations in Haryana next month could be around 85 per cent much higher than a 40 and 60 per cent production in September and October, the carmaker had upwards of 2 lakh pending orders before the end of October 2021, and that number could increase substantially following Diwali.

“While the shortage of electronic components continued to affect the production of vehicles during the month, the company took all possible measures to minimise the impact. Accordingly, the company sold more vehicles than the sales volume expected at the start of the month,” Maruti said.

Semiconductor chips are used in a variety of functions which play a critical part in the production of internal combustion engines. Besides, they are an integral part of all kinds of sensors and controls in any vehicle.

At present, these shortages have forced several OEMs to slow down production, thus, further extending the waiting periods of popular, feature-rich and high-end models.

Sales of mini cars, comprising Alto and S-Presso, fell 23 per cent to 21,831 units as compared to 28,462 in the same month last year.

Similarly, sales of compact segment, including models such as Swift, Celerio, Ignis, Baleno and Dzire, slumped 49 per cent to 48,690 units as against 95,067 cars in October last year.

Second largest carmaker Hyundai reported a 37 per cent decline in total sales at 43,556 units in October

The company had sold 68,835 units in the same month last year.

Domestic sales were down 34 per cent to 37,021 units as against ‘56,605 units in October 2020, the company added.

The global semiconductor supply constraint has adversely affected vehicle production, the company said.

Industry executives and analysts tracking the sector said that the shortage of chips impacting production will keep impacting the automobile industry for some time to come.

“We have started to see booking build up and this month is looking better than last month. However this is not good enough and we need to increase production even further, “said PB Balaji, adding that the company is trying to reduce the usage of semiconductors in its product portfolio.

The Mumbai based company reported a 30 percent growth in domestic sales at 52,132 units in October 2021. The company had sold 67,829 units in the same month last year.

Channel checks by brokerage firms showed that order bookings are extremely strong for passenger vehicles with a waiting period of up to six months for the top-selling models. “Dealers expect a subdued festive season owing to supply constraints. Dealer inventory levels are low at 1-2 weeks. Assuming supply issues persist, dealers may run out of stock by October-end for passenger vehicles,” analysts at Emkay Global Financial Services said.