Mumbai, Maharashtra
The ongoing chip shortage is likely to moderate passenger vehicle sales growth to 11-13% this fiscal, down from the earlier volume growth forecast of 16-17 per cent, delaying the industry recovery as the waiting period is increasing amid strong demand due to production curbs, says a Crisil report.
The semiconductor shortage will lead to a decline of 400-600 basis points according to a Crisil analysis of the top three passenger vehicles companies which command a combined market share of 71%.
Semiconductors or chips are key components of a vehicle as they facilitate a range of features such as navigation, infotainment and traction control and more the premium the use of chips goes up. For OEMs, the shortage has led to production losses, while for customers, the waiting period for some models has increased from 2-3 months to 6-9 months now, the report said.
The report blamed the shortage to poor inventory planning by OEMs, chip hoarding by Chinese companies, and natural disasters hitting major chip factories apart from the logjams at ports. Since the pandemic began, preference for personal mobility has increased, leading to more-than-expected demand for cars, it said. Besides, consumers have also been preferring vehicles with more electronics-driven features which employ more semiconductors, the report said. The upshot of the chip shortage is cut in car production, which will have a bearing on the ongoing festive season as well when sales are typically higher, it said.
The shortage is expected to will linger onto the first quarter of 2022 as capacity addition is not keeping pace with demand. OEMs on their part coping with the shortage by diverting chips to high demand segments such as utility vehicles, and prioritising the production of premium cars. Some of them are even removing features from certain models, to conserve chip usage, it said.
Source: The Times Of India
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