Semiconductor chip shortage continues to put brakes on Car sales in festive season

As the semiconductor chip shortage woes continue in the global and domestic market, passenger vehicle makers stare at losing 2.5 lakh to 4.5 lakh units in sales. The supply-side constraints are likely to drag the wholesale volumes to 29-31 lakh units in 2021 from an earlier estimation of around 33.4 lakh, automotive consultancy firm Jato Dynamics estimated. As per a report in financial daily, The Economic Times, for CY2020 passenger vehicle sales stood at 24.3 lakh units and for CY2018 it was 33.9 lakh units.

"Both 'chip and ship' are huge constraints at the moment. Freight rates have gone up, sailing schedules are unpredictable because of the container issue. We are facing problems in every car line because of the chip shortage. Industry growth will definitely come down from what we had estimated, both at the beginning of the year and post the second wave of the pandemic." ET quoted Rajeev Chaba, president, MG Motor India as saying.  

Huge demand-supply mismatch in passenger vehicle segment

Despite the fact that consumer demand swiftly recovered during the second wave of Covid-19, owing to an increased inclination for personal mobility, output has been unable to keep up. After Malaysia, a key sourcing hub in the global semiconductor supply chain reimposed lockdowns, the situation quickly deteriorated.

The global supply has also been hampered by the scarcity of semiconductors. In the United States, four of the top automakers - General Motors, Honda, Stellantis, and Nissan - reported double-digit sales declines in the third quarter due to a shortage of chips that caused them to idle assembly lines. Due to the semiconductor scarcity, new automobile registrations in Europe decreased 23.1 percent to 718,598 in September from a year earlier.

Due to a shortage of electronic components caused by the semiconductor shortage, India's market leader Maruti Suzuki stated earlier this month that vehicle manufacturing volume will be 60% of normal in October. In September, the business reduced output by 60%. In September, overall passenger vehicle sales fell 37% to roughly 185,000 vehicles. Due to supply difficulties, carmakers such as Hyundai Motor India, Kia India, and Mahindra & Mahindra reported a double-digit reduction in factory dispatches in September.