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Passenger vehicle manufacturers cut dispatches due to semi-conductor shortage

With most dealerships functional across the country, manufacturers were expected to increase inventory levels before the festival season. (Bloomberg)Premium
With most dealerships functional across the country, manufacturers were expected to increase inventory levels before the festival season. (Bloomberg)

  • The rise in covid cases in countries like Malaysia and Indonesia and the consequent lockdowns have led to inordinate delay in delivery of semi-conductors and other important components to domestic automakers

NEW DELHI : India’s leading passenger vehicle manufacturers have reduced dispatches to dealerships in August, compared to the preceding month, as acute shortage of semi-conductors hit production. With most dealerships functional across the country, manufacturers were expected to increase inventory levels before the festival season.

The rise in covid cases in countries like Malaysia and Indonesia and the consequent lockdowns have led to inordinate delay in delivery of semiconductors and other important components to domestic automakers.

Maruti Suzuki India Ltd, the country’s largest car maker, reduced domestic dispatches on sequential basis by 22.5% to 105,775 units in August compared to just 136,500 units in July. Sales of the company’s passenger cars stood at 68,184 units in August, while the same for utility vehicles was at 24,337 units.

The company has already guided for a production cut of around 60% at its Haryana and Gujarat based plants due to the lack of components.

Country’s second largest vehicle manufacturer, Hyundai Motor India Ltd, also reported 2.4% m-o-m drop in wholesales to 46,866 units in August compared to just 48,042 units the month before.

Mumbai-based car maker Tata Motors' passenger vehicle wholesales fell by 7.17% to 28108 units despite healthy demand for its new products like Altroz and Safari. 

Mahindra and Mahindra also reported a 24% decline in dispatches to 15,973 units. New entrant, MG Motor India though reported a 2.13% increase in sales to 4,315 units.

When lockdown was imposed in April to contain second wave of Covid infections, most passenger vehicle manufacturers did not have much inventory at dealerships due to gradual improvement in sales and production constraints. Hence, most of them had plans to ramp up manufacturing substantially since June to build adequate inventory before the festive season.

“Semiconductor shortage continues to impact the auto industry globally. The recent lockdowns in East Asia have worsened the supply situation and hence Tata Motors is forced to moderate production and offtake volumes in the coming months. The situation is fluid and we will continue to work to mitigate the impact of this and aim to meet our customer orders through an agile, multi-pronged approach including close engagement with our extended supply chain partners," said a spokesperson of Tata Motors.

The auto industry came under pressure from the first week of April when Maharashtra implemented strict lockdown measures. Delhi, Haryana, Karnataka, Tamil Nadu and others followed suit. Most automakers either stopped production or reduced output significantly.

Some like Bajaj Auto Ltd continued to operate with limited capacity to meet export orders. With a steady drop in infections, especially in north and south India, most automakers have resumed operations from the middle of May.

Vehicle sales are usually compared on a corresponding basis but in March, last year, automakers had to close down their respective factories and showrooms, as the union government imposed stringent nation-wide lockdown from 18 March. Subsequently, operations remained suspended till first week of May and return to normal production schedule took place only from August.

With economic activity picking up due to a rise in construction and manufacturing activities, commercial vehicle wholesale at Tata Motors jumped 33.57% to 26,172 units, although on a very low base. Ashok Leyland, the second largest commercial vehicle maker, dispatched 8,400 units in August.

In the two wheeler segment, Bajaj Auto reported a meagre 1.1% sequential increase in dispatches to 157,971 units as demand for entry level motorcycles have been muted due to price increase and high fuel prices.

“We prefer passenger vehicle (PVs) manufacturers over two-wheelers as they are the least impacted segment currently and offer a stable competitive environment. We expect the commercial vehicle cycle to recover and gain momentum towards second half of FY22. In our estimates, we have built in strong recovery in 2HFY22 and beyond," said analysts of Motilal Oswal in a note on 31 August.

 

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