Power crisis could disrupt automotive supply chain

The national-level power crisis which is reportedly the worst in six years could further strain the fragile supply chain of the automotive industry with micro and small enterprises beginning to feel the pinch. An upset in the parts supply chain could potentially disrupt automotive production linkages.

Tier-2 and tier-3 suppliers could be the worst affected by the ongoing power crisis as many do not have a captive power source and therefore, are dependent on state-supplied electricity. Vehicle manufacturers and large tier-1 suppliers have a secured renewable power source and therefore have a very low requirement from power supplied by the States.

“Some heavy power users like forging and casting suppliers are feeling the pinch already,” said a top executive of a tier-1 company engaged in drivetrain technology supplying to Tata Motors.

Meanwhile, a Pune-based supplier engaged in exhaust systems supplying to Bajaj Auto, Maruti Suzuki, among others, said, “We have not been affected so far since our primary source is solar and wind energy. But tier-2 and tier-3 suppliers would be feeling the heat for sure.”

Drastic measures taken by Indian Railways

On April 29, the Indian Railways was forced to cancel 42 passenger trains to make way for faster movement of coal to power generating plants amid widespread power outages reported by many States. Punjab, Haryana, Uttarakhand, Andhra Pradesh, Uttar Pradesh, Tamil Nadu and Maharashtra; States that house several automotive and automotive parts producing companies are facing blackouts due to a shortage in power. 

“We have set up one of the largest solar energy capacities in Asia. We are purchasing wind energy (too). So, a big part of our energy requirement is taken care of by renewable energy. There is also some dependence on the energy provided by the State government,” said Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility speaking to BusinessLine.

Chandra added, “We won’t be impacted by the current power crisis but the effect can be through suppliers. The big ones (auto parts) have captive supply. So far, we have not heard of any crisis from them.”

Last week, the Manesar Industries Welfare Association wrote a letter to the State power distribution company to apprise them of the acute situation where blackouts happen every day for an hour during work hours. The Gurgaon-Manesar-Dharuhera belt not only houses factories of large automakers like Maruti Suzuki and Hero MotoCorp, but it is also home to all tiers of auto parts manufacturers.  

Impact of severe heat conditions

Maruti Suzuki, India’s largest carmaker blames the “unusual heat conditions” currently prevailing in the country for the surge in power demand in April. The maker of Swift and Baleno claims to not have witnessed any effect of the power crisis on its production.

RC Bhargava, Chairman, Maruti Suzuki India, said, “I don’t think the power crisis is going to be of long duration. We have an unusual heat situation in the country. April temperatures have pushed up the demand for power substantially. But overall India has done pretty well in the power sector and we have grown adequately in capacity and there is hardly been any serious shortage, but yes, there have been problems with regard to distribution and transmission. But we are not a power deficit country in normal conditions. I don’t think this is a cause of worry to us.”

Issues with the supply chain have been plaguing the automotive industry for the past several quarters with a shortage in semiconductor availability topping the charts. The industry claims to be sitting on a total order book of 7,50,000 units which is equivalent to the supply of three months’ sales.