The impact of the second wave of the pandemic on the automobile industry may have disappeared, but that of the semiconductor shortage lingers.
Maruti Suzuki may have to reduce its production plans for this year by 5% if the shortage continues, people in the know said. That would be an output loss of 70,000-80,000 units, or more than ₹4,600 crore, at the market leader.
A 5% impact on Maruti Suzuki’s volumes would mean a 2.5% hit on production in India’s passenger vehicle segment, since the company makes half the cars and SUVs sold in the country.
Shortage of chips that are an integral part of new-age vehicles is a global phenomenon, and almost every automaker is suffering. In India, the industry is estimating the total production loss due to this in the July-September quarter alone to be close to 100,000 units, even as it is sitting on a huge backlog of orders.
This shortage is so severe that Renault and Nissan suspended production for a day at their alliance plant near Chennai on Tuesday. Industry executives are expecting more such shutdowns in the coming months.
At Maruti Suzuki, rationalisation of production at the Gujarat plant of parent Suzuki Motor in August will affect the supply of its key volume drivers — the Baleno, Swift and Dzire models, the people said.
“These are uncertain times of semiconductor shortage and in the best interest of our shareholders, whenever felt appropriate we provide guidance on any such impact and also duly inform of production suspension if any,” a Maruti Suzuki spokesperson told ET.
Suzuki Motor Sees Shortage till FY22 End
Maruti Suzuki’s parent, Suzuki Motor Corp (SMC) of Japan, has guided for low double-digit volume growth for its Indian operations when it released its first volume forecast for the current fiscal year. This was less than half the 25-30% growth expected by analysts in India. Suzuki Motor has forecast its total automobile sales to grow 5.5% to 2.71 million units in FY21 (which is FY22 in India), out of which Asia is expected to grow by 11% to 1.72 million units. India, which accounts for 90% of its Asia sales, too is predicted to grow 11%.
Second wave also factored in
Based on this guidance, the Indian operation is likely to deliver an output of 1.62 million in the current fiscal year. This is significantly lower than the tentative production plan of around 1.9-2 million units shared by the company with its vendors. The new forecast takes into account the production loss due to the second wave as well as the chip shortage.
Suzuki’s guidance is based on the expectation that the shortage of semiconductors will continue till the end of the current fiscal year.
According to a Credit Suisse report, SMC’s management guidance appears to be factored in the negative impact of 350,000 units in global sales due to semiconductor supply shortage, of which 250,000 units are in Japan and remaining overseas. Given that India’s contribution is 75-80% of volume outside Japan, it would mean the chip shortage could potentially hit volume of around 75,000 units.
Suzuki Motor Gujarat’s production loss in August is estimated at 11,000-12,000 units, worth Rs 500-700 crore. The production plan for September has already been revised downwards.
‘Overwhelming Demand’
At Renault-Nissan, output of the recently launched SUV models Renault Kiger and Nissan Magnite is hit by 20-40% because of the chip shortage. The companies are sitting on bookings in excess of 20,000 units on each of these models, but their deliveries are getting delayed.
Read more on chip shortage
The situation has compelled vehicle makers to redesign products, source from the open market, and get into a three-way tie-up – i.e. car maker-tier I vendor and chipset maker. Due to the shortage, the vehicle makers are compelled to source parts from the open market at higher prices, affecting their margins.
Company likely to lose 6500 to 7000 units of production, as Suzuki Motor Gujarat production to move to single shift for a week
