Chip Shortage Hits Auto Industry

If you are planning to buy your favorite car, you may have to wait longer as a severe shortage of chips has led automakers to cut production. The limited supply of cars comes at a time when the demand is buoyant. Checks with dealers and company executives indicate popular models such as Mahindra XUV700, Thar, Hyundai Creta, Kia Seltos, Maruti Suzuki’s Baleno and a couple from the MG Motor stable have waiting periods running into months.

The waiting period for M&M’s XUV700 is more 18 months while for the Thar is close to eight months. Buyers will need to wait more than nine months for Creta’s top-end diesel variant and 2-4 months for models from Maruti Suzuki. Tata Motors’ electric cars are expected to be delivered 2-3 months post the booking, according to the Federation of Automobile Dealers Associations (FADA).

Shashank Srivastava, senior executive director, marketing and sales, Maruti Suzuki India, told FE that post-Covid-19, demand has been strong leading to an increase in bookings even from rural markets. However, due to supply constraints, production levels have been impacted resulting in longer waiting periods for deliveries. “We have been adjusting production schedules to manufacture the variants that are in demand, working closely with our vendor partners to maximize component supplies,” Srivastava said.

Veejay Nakra, CEO, automotive division, Mahindra & Mahindra, said the global semiconductor shortage and other disruptions in the supply chain have been further impacted due to the current geopolitical uncertainty and Covid-related lockdowns in different geographies globally. “We are continuously working on a host of short-term measures such as developing new supply sources and spot buying of critical ICs, multi-sourcing of components and finding suitable substitutes to address the semiconductor supply issues,” Nakra said.

“You name the car and there is at least a 2-3 month waiting period,” Vinkesh Gulati, president, FADA, told FE. Since top-end variants are usually more popular with buyers, the waiting period for these variants is typically longer. Maruti has 2,85,000 bookings at present compared to 1,74,000 during this period last year. While production levels had gone down to 40-60% during September-October last year, they have subsequently gone up to a range of 90-95% between December-March. It remains to be seen whether these levels can be sustained over the next six months. The company does not see production levels going up to 100% during the April-June quarter.

In the Delhi-NCR region alone, there’s a waiting period of roughly 6-8 weeks for the Baleno and Ciaz, and 6-18 weeks for the Vitara Brezza. Hyundai Motor India, the country’s second-largest PV manufacturer, has close to 110,000 pending bookings at present, similar to levels seen last year around this time. Depending on the variant, the waiting period for the Hyundai’s i20 is 4-15 weeks in Delhi-NCR and 6-8 weeks for the Verna. For SUVs like the Venue and Creta, the waiting periods are around 6-8 weeks and 25-47 weeks, respectively.

According to FADA’s Gulati, “For every 100 cars being produced, there are 120-130 bookings. “Unless automakers raise capacity, and that too fast, long waiting periods will remain,” he said.