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Easing supplies of semiconductor chips is aiding a gradual recovery in production for Indian automakers as they line up new launches to capture a sharp rebound in automobile sales with the abatement of the pandemic and an increased preference for personal mobility.

Leading carmakers such as Maruti Suzuki and Mahindra & Mahindra (M&M) have said that semiconductor supplies have begun to improve from June and that production is expected to rise from this month.

Senior industry executives said Maruti Suzuki, the country’s largest carmaker, plans to produce more than 11,000 units of its newly launched compact SUV Brezza this month, whereas M&M is looking to add 6,000 units of its new Scorpio-N SUV as it gears towards a festive season delivery.

Maruti Suzuki is also gearing up to start production of a new midsize SUV at Toyota’s Karnataka plant starting August, which is expected to go on sale sometime in the festive season.

“The semiconductor situation has become better. We were at 40% of our plan in September last year, which was when we were the worst hit. We increased it to 60% in October, 85% in November, 90% in December, 92% in Jan and Feb, 93-94% in March and April, and 95% in May and June. So, in that sense, there is a consistent increase. We are not certain what time we will reach 100%, but we expect to get there soon," said Shashank Srivastava, executive director of Maruti Suzuki.

Automakers’ reliance on electronic chips has significantly increased as vehicles become more feature-rich. Carmakers across the board see greater preferences for top-end variants of cars, which use comparatively more semiconductor chips than the lower-end versions.

Carmakers are also revisiting lower-end models to eliminate the use of chips that are not critical to a vehicle. The shortage of chips and the lack of supply chain readiness have also pushed back launch timelines for some automakers, as was the case for M&M’s Scorpio-N, which was launched after a delay of more than a quarter. Despite easing chip supplies, automakers are running waiting periods as long as two years for some models as demand continues to outstrip supply.

“The chip situation has improved compared to what it was for us from August to December last year. We, in particular, were very dependent on one supplier who had a very high dependence on Malaysia, and Malaysia had a washout for almost two months due to covid-19. But since then, the semiconductor situation is much better," said Rajesh Jejurikar, executive director, auto and farm sector at M&M.

Recent supply-chain disruptions emanating from the fresh surge of covid-19 in China are also easing. “Demand for passenger vehicles continued to stay strong in Q1 FY23 even as the supply side remained moderately impacted due to the lockdown in China. As a result, we expect the supply side, including that of critical electronic components, to progressively improve," said Shailesh Chandra, managing director, Tata Motors passenger vehicles and Tata passenger electric mobility, in a press release announcing its June quarter sales on Friday.

“The most difficult part of the China lockdown is behind us. Shanghai is now mostly open, with panic in some pockets. Beijing is affected, but there isn’t a large industrial base there, so it doesn’t affect supply chains the way Shanghai did," Jejurikar added.

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