Auto makers rework shop floor strategies amid stubborn chip shortage

Auto makers rework shop floor strategies amid stubborn chip shortage

have been badly hit in October owing to the ongoing shortage of semiconductors globally. Industry executives said while there is no certainty how long the shortage will last, they are much better prepared to handle production, taking steps like reducing chips in cars.

The country’s largest carmaker Maruti Suzuki India (MSI) on Friday reported around 33 per cent decline in sales at 1,08,991 units in October. The company had sold 1,63,656 units in October last year.

The carmaker said that, according to current estimates, total vehicle production (in volume) across both its facilities in Haryana next month could be around 85 per cent.

This is much higher than 40 per cent and 60 per cent in September and October, respectively.

The carmaker had over 2 lakh pending orders before the end of October 2021, and that number could increase substantially following Diwali.

“While shortage of electronic components continued to affect the production of vehicles during the month, the company took all possible measures to minimise the impact.

Accordingly, it sold more vehicles than the sales volume expected at the start of the month,” Maruti said.

chips are used in a variety of functions, which play a critical part in the production of internal combustion engines. Besides, they are an integral part of all kinds of sensors and controls in any vehicle.

At present, these shortages have forced several original equipment manufacturers (OEMs) to slow down production, thus, further extending the waiting periods of popular, feature-rich and high-end models.

Sales of mini cars, comprising Alto and S-Presso, fell 23 per cent to 21,831 units as compared to 28,462 in the same month last year.

Similarly, sales of Maruti cars in the compact segment, including models such as Swift, Celerio, Ignis, Baleno and Dzire, slumped 49 per cent to 48,690 units against 95,067 cars in October last year.

Hyundai, the second largest carmaker, reported a 37 per cent decline in total sales at 43,556 units in October. The company had sold 68,835 units in the same month last year.

Domestic sales were down 34 per cent to 37,021 units against 56,605 units in October 2020, the company added.

Global supply constraints have adversely affected vehicle production, the company said.

Industry executives and analysts tracking the sector said shortage of chips will keep on impacting the automobile industry for some time.

“We started to see bookings build up and this month is looking better than last month. However, this is not good enough and we need to increase production even further,” said PB Balaji, CFO of Tata Motors. He added that the company is trying to reduce usage of semiconductors in its vehicles.

The Mumbai-based firm reported a 30 per cent growth in domestic sales at 52,132 units in October 2021. The company had sold 67,829 units in the same month last year.

Channel checks by brokerage firms showed that order bookings are extremely strong for passenger vehicles with a waiting period of up to six months for top-selling models.

“Dealers expect a subdued festive season, owing to supply constraints. Dealer inventory levels are low at one-two weeks. Assuming that supply issues will persist, dealers may run out of stock by October-end for passenger vehicles,” analysts at Emkay Global Financial Services said.

Auto makers rework shop floor strategies amid stubborn chip shortage

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