Malaysia lockdown may dent upcoming festival auto sales

S Ronendra Singh New Delhi | Updated on August 30, 2021

Adds to the woes of OEMs that are already facing severe chip shortage

The domestic automobile manufacturers, who are facing a tough situation following the shortage of semiconductors, may have to further cut production in September due to lockdown in Malaysia, which is one of the largest chip suppliers. The original equipment manufacturers (OEMs) are now worried, as it comes at a time when companies are preparing for festival season sales.

The Malaysian crisis is adding stress to the existing semiconductor shortage issues and companies may run into huge opportunity losses, running up to thousands of crores in value terms. Sources in the industry said Mahindra & Mahindra is one of the biggest victims of this semiconductor shortage as many of its vehicles are lying idle in its factories for want of chipsets.

Supply issues

“Demand will not be an issue, It will be on the supply side and is the only fear that we have. The semiconductor issue has been the showstopper as far as industry numbers are concerned. While we were dealing with this uncertainty, the Malaysia Covid restrictions kicked in. This is just adding to the concern that we already had because of the semiconductor issues globally,” Shailesh Chandra, President, Passenger Vehicles Business, Tata Motors told BusinessLine.

Tata Motors has been managing the semiconductor issue at ‘multiple levels’, including closely working with the tier-I suppliers and co-ordinating with suppliers, said Chandra.

The shortage of chipsets is so much that the companies are also buying directly from the suppliers at a higher price. “Wherever possible, we are trying to see if we can optimise the use of microcontrollers in certain parts. We are also trying to find out availability from the stockists and directly purchasing them at a higher price,” Chandra said.

According to Shashank Srivastava, Senior Executive Director (Marketing & Sales), Maruti Suzuki India (MSIL), the demand and supply of cars reflect the semiconductor shortage. “This has been a month (August) when we had limited production because of the semiconductor shortages,” he said.

Earlier this month, Suzuki Motor Gujarat had announced three Saturdays as no production days which hit sales. The company may go for shut down for a few days in September too.

RC Bhargava, Chairman, MSIL, had said that it was not clear how long the situation of chip shortages would last, and till things improve, production across the industry would be affected with temporary shut downs.

Published on August 30, 2021

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