Persistent shortage of brake slamming chips, slowing car sales this Navratri

As every year car dealers have been eagerly awaiting Chaitra Navratri for good sales, the continued shortage of semiconductor chips may slow down manufacturing which will negatively affect sales this season.

Long waiting times have become the new norm for car buyers. Customers now have to wait between one and twelve months for delivery, depending on the car segment. For sedans such as the Alto K10 and Hyundai i20, the waiting period is one to two months, while SUVs have a waiting period of 6 to 12 months.

Charisma Hyundai Chandigarh Sales Manager Saurabh Sood said he mainly delivers pre-booked vehicles during this festive season. Anyone looking to buy a Hyundai car will now have to wait between one and three months, he added.

Regarding the stock of vehicles in their inventory, Sood said that previously they would have a stock of 100-120 vehicles, but now they have a maximum of 50 vehicles. A sales manager at Tata Motors Berkley Chandigarh said the semiconductor shortage had affected sales by almost 50%. However, this is not due to a drop in demand, which is higher than before, but to the difficulty of delivering vehicles on time.

The long waiting period makes customers think twice before buying a car. Amal Bhatnagar, banker at ICICI Mohali, wants to buy a new Tata Nexon but is in a difficult situation due to the long waiting period of 3-4 months.

Nitin Sharma, a trader and resident of Zirakpur, went to buy a new XUV 700, but when he approached a dealer two weeks before Navratri, he was told that delivery would not be possible until December 2022.

How did the crisis start?

Pandemic-induced lockdowns have forced chipmakers to halt production. While stuck indoors, consumers around the world bought all sorts of microchip-equipped products such as laptops, smart TVs, game consoles, and more, pushing demand for addicted devices. fleas during the pandemic at record highs. This has caused such a large gap between demand and production that chip vendors are still struggling to clear the backlog, with more and more orders pouring in daily.

While there was speculation that the chip shortage would soon ease, Russia’s invasion of Ukraine has further slowed progress, as Russia and Ukraine are major suppliers of materials needed for the production of chips (palladium from Russia and neon gas from Ukraine).

What do the numbers say?

The latest retail sales figures released for February 2022 by the Federation of Automobile Dealers Associations (FADA), highlighted a crisis in sales figures for all vehicle segments. In February 2020, a total of 17,32,161 vehicles were manufactured across all segments, compared to 15,13,894 recorded in February 2021 and 13,74,516 in February 2022. FADA figures come from 1,391 RTOs in conjunction with the Ministry road transport. & Highways.

The economic survey (2021-2022) also shows that automakers had racked up more than seven lakh orders by December 2021.

How are companies dealing with the chip shortage?

The shortage of chips has forced automakers to adapt and reduce production. Major Indian auto giants like Mahindra and Tata are reducing the use of chips in their vehicles. However, this carries the risk of producing vehicles with fewer features which may not appeal to consumers, who may choose to wait for a car with more features.

Consumers are also turning their attention to used cars, leading to a sharp increase in the market capitalization and sales figures of used cars around the world.

What the future of automakers looks like

A difficult road awaits automakers with the crisis of the war in Ukraine, high oil prices, weak chip supply chain and an auto market more competitive than ever.

Although the Center has enticed the microchip industry with a Rs 76,000 crore package, it may not be enough to bring the crisis under control.