A pandemic-induced global shortage of semiconductor chips slashed global auto volumes by a quarter in 2021. The pandemic is now over, and India has recorded its best ever passenger vehicle sales in FY23. So why does the shortage persist? Mint explains:
How has the chip supply fared since 2021?
The Covid-19 pandemic has led to a global shortage of semiconductor chips as demand for electronic components soars, disrupting supply chains across sectors. The automotive industry relies heavily on these chips for various functions, and was hit particularly hard. According to JP Morgan Research, “the chip shortage is all but over”. Global automotive sales volume is expected to grow by 3% in 2023, compared to a 26% decline in the first 9 months of 2021. In general, supply is expected to improve as capacities added in 2022 are ramped up in 2023.
What’s the challenge then?
While overall availability has improved, the nature of supply chain disruptions has changed. Increasing electrification and the preference for high-end passenger vehicles means that there will continue to be shortages of specific chips and electronics for some products. This in turn means that many automakers are unable to increase the volume of in-demand products. For example, some Indian automakers are grappling with a shortage of electronic control unit chips for airbags, which is affecting waiting periods. JP Morgan said that this decrease could continue till 2023 and could continue in 2024 as well.
Have delivery dates improved for automakers?
There were some signs of chip shortages easing in the last few quarters of fiscal 2023, but availability is again uncertain in the first quarter of 2024. M&M is facing problems with its popular Scorpio-N, and Toyota has temporarily stopped bookings for the top trims of its highcross SUV due to supply issues.
What is the impact on production plans?
India’s largest carmaker Maruti Suzuki expects the chip shortage to hit production in FY24. RC Bhargava, chairman of Maruti Suzuki, said that the supply in the first month of this quarter looks worse than in the last quarter of FY2023. The company faces a production loss of 170,000 units in fiscal year 2023 due to semiconductor shortages. Luxury carmakers like Mercedes Benz have postponed new product launches to ensure there are enough chips to meet demand.
What is the outlook for chip availability?
The general improvement in availability can still vary greatly between companies. Automakers expect the situation to ease in the coming months, but chip availability visibility is still limited. The passenger vehicle maker is eyeing volume growth of 6-8% to 4.10 million units this fiscal. But each automaker’s growth will depend on how well it matches chip availability and demand. Firms are giving priority to top-of-the-line variants to maximize profitability.
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Updated: May 02, 2023, 12:48 AM IST