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Business News/ Auto News / PV firms cut production due to semiconductor shortage

PV firms cut production due to semiconductor shortage

A resurgence of covid-19 in East Asian nations such as Malaysia has led to supply-side issues
  • MSIL has guided for a production cut of around 60% at its plants in Haryana and Gujarat
  • PV makers were looking to build stocks before the festive seasonPremium
    PV makers were looking to build stocks before the festive season

    India’s leading passenger vehicle (PV) makers cut production and dealer dispatches in August, compared to the preceding month, as a continued shortage of semi-conductor chips disrupted manufacturing schedules.

    With most dealerships having reopened following relaxations in covid-related restrictions, companies are also expected to augment dealer inventory levels before the festive season when automobile sales traditionally peak.

    A resurgence of coronavirus infections in countries such as Malaysia and Indonesia and consequent lockdowns there have, however, led to an inordinate delay in delivery of semiconductors and other key parts to automakers in India.

    Hitting a bump
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    Hitting a bump

    Maruti Suzuki India Ltd, the country’s largest car maker, reduced domestic dispatches on a sequential basis by 22.5% to 1,05,775 units from 1,36,500 units in July. The figure included 68,184 passenger cars and 24,337 utility vehicles.

    The company has already guided for a production cut of around 60% at its Haryana and Gujarat-based plants because of a shortage of components.

    The country’s second-largest vehicle maker Hyundai Motor India Ltd reported a 2.4% drop in wholesales to 46,866 units in August from 48,042 units the previous month.

    Mumbai-based Tata Motors saw passenger vehicle wholesales fall by 7.17% to 28,108 units despite healthy demand for its new products such as Altroz and Safari. Mahindra and Mahindra also reported a decline of 24.1% to 15,973 units. New entrant, MG Motor India, however, reported a 2.13% rise in sales to 4,315 units.

    When lockdowns were imposed in April to contain the second wave of covid infections, most passenger vehicle makers had exhausted a bulk of their dealer stocks because of a gradual improvement in sales in the prior months and production constraints.

    Most of them had plans to ramp up manufacturing substantially since June to build adequate stocks 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 Tata Motors spokesperson.

    Vehicle sales are usually compared on a corresponding basis but in March last year automakers had to shut down their factories and showrooms as the Union government imposed a stringent nationwide lockdown. Subsequently, operations remained suspended till the first week of May and resumed only in August.

    With a recovery in economic activity because of a pick up in construction and manufacturing activity, commercial vehicle wholesales at Tata Motors jumped 33.57% to 26,172 units, though on a very low base. Sales at Ashok Leyland Ltd, the second-largest commercial vehicle maker, rose 43.5% to 8,400 units.

    In the two-wheeler segment, Bajaj Auto Ltd posted a marginal 1.1% sequential rise in wholesales to 157,971 units as demand for entry-level motorcycles had been muted because of an increase in product prices and higher fuel costs.

    “We prefer passenger vehicle (PV) 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 at Motilal Oswal in a note on 31 August.

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    Published: 02 Sep 2021, 12:32 AM IST
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