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Despite an improvement in the availability of semiconductor chips, vehicle makers are likely to take 2-3 quarters more to restore normalcy in production and to overcome the supply-demand mismatch.
Availability of chips for the automotive sector has improved on the back of a slowdown in demand in the electronics space. As a result, the global supply-side shortages are easing for the auto industry.
Though passenger vehicle makers are ramping up capacities to cut waiting periods for customers, the growth in supply is not sufficient to meet the demand.
“Demand for auto chips remains strong with a pick-up in the volumes of passenger vehicles, given the tailwinds of a post-Covid recovery and the supply chains falling short of meeting the requirements. The increase in demand for electric vehicles globally has also contributed to this shortage. Consequently, most OEMs in India have been reporting a loss of volume, although it has eased significantly in relation to the position a year back,” says a report by India Ratings & Research.
The personal computer market, inclusive of desktops, notebooks, and workstations, declined by 11.7 per cent year-on-year during September 2022 quarter after eight consecutive quarters of growth, while the country’s smartphone market declined 10 per cent during the last quarter. This was the lowest third-quarter shipment since 2019 despite an earlier onset of the Diwali festivities, according to IDC.
However, despite the slackening demand for electronic chips required for smartphones and PCs, the supply of automotive chips has not returned to normalcy.
‘WORST IS OVER’
“While the worst is probably over for chip shortages, normalisation of supply could still take time and would remain a function of not only capacity constraints but also the slowing global demand. Volume losses for auto OEMs to continue at least until Q2 FY24 as against the earlier projection that normalisation would be resumed from this year-end,” added India Ratings.
Maruti Suzuki reported its highest-ever quarterly volumes in September 2022 quarter helped by better availability of chips. But the availability was inadequate and the country’s top carmaker witnessed a volume loss of about 35,000 units during the quarter.
“The supply situation of electronic components continues to remain unpredictable,” the company management said during its Q2 FY23 earnings call about a month ago.
Along with Maruti, other PV makers are also facing similar challenges due to the insufficient availability of semiconductor chips.
For commercial vehicle makers, the continuing shortages are affecting the production of their light commercial vehicles, i.e, small commercial vehicles, which are used for last-mile delivery by companies run on hub-and-spoke models.
Dheeraj Hinduja, Executive Chairman of Ashok Leyland, said in a recent interaction that the company couldn’t meet the strong demand for its small commercial vehicles such as Bada Dost due to semiconductor shortages.
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