Semiconductor shortage bytes into September car sales: down 36%

by Mayank Dhingra 01 Oct 2021


The chips are really down for India Auto Inc as the sector has been facing the heat from the global semiconductor shortage for over a year now. A  high-on-connectivity and electronics car typically uses around 150 semiconductor chips which go into the infotainment system, digital instrument cluster, central locking system and tyre pressure monitoring system. And these vital chips, which provide bits and bytes of memory, are in short supply now. 

The chip crisis initially arose from the massive surge in demand for personal computers and smartphones at the height of the pandemic as the world turned to working from home. Semiconductor companies diverted supplies away from the auto sector to the higher margin electronics industry and now chip production fallen behind demand. It’s a situation Indian automakers are now familiar with – production lines halted, lead times extended and what’s more some OEMs are even removing options from cars. All this just when India’s festive season is about to open.

With Maruti Suzuki, the bellwether of the passenger vehicle industry, reporting as much as a 57% year-on-year (YoY) sales decline, it clearly indicating how dire the situation is in the market.

Let’s take a look at the September sales numbers of key carmakers in India:

Maruti Suzuki India: 63,111 units / -57%
The PV market leader registered sales of 63,111 units last month, down 57 percent on year-ago sales of 147,912 units. The company had already warned shareholders about executing a 60 percent production reduction in September due to shortage in chip supply.

Maruti Suzuki’s entry-level Alto and S-Presso models sold a total of 14,936 units (September 2020: 27,246 / -45%), while the six-pack group of the Wagon R, Swift, Celerio, Ignis, Baleno, Dzire and Tour S registered 20,891 units (84,213 / -75%).

The UVs, that include the Vitara Brezza, Ertiga, XL6, S-Cross and Gypsy, too registered reduced sales of 18,459 units (23,699 / -22%).

Hyundai Motor India: 33,087 units / -34.2%
The No. 2 player wasn’t spared from the chip shortage either with September wholesales declining to 33,087 – a 34.2 percent decline on a YoY basis – over 50,313 units sold in September 2020.

The company had earlier acknowledged that it’s part of the global supply chain and is getting impacted by the prevalent scenario. The impact only means that Hyundai’s much-in-demand models like the Creta and i20 are further going to see an uptick in waiting periods for customer deliveries.

Tata Motors: 25,730 units / +21%
The homegrown carmaker has been theone to have bucked the trend and registered a 21 percent YoY uptick in sales to 25,730 units (September 2020: 21,199). Out of the total sales, 1,078 units have come from sales of EVs, which registered a marked jump of 250 percent over 308 units sold in September last year.

“EV sales recorded nearly a three-fold growth with the rising acceptance and popularity of the Nexon EV and Tigor EV. Looking ahead, the demand for cars and SUVs is expected to remain strong in the forthcoming festive season; however, the supply situation for electronic components may continue to witness challenging times,” said Shailesh Chandra, president, PVBU, Tata Motors.

Kia India: 14,441 units / -23%
Kia India registered a 23 percent YoY decline in September sales, which were pegged at 14,441 units (September 2020: 18,676). The sales split stood at 9,583 units of the Seltos, 4,454 units of Sonet and 404 units of the refreshed Carnival premium MPV.

“The disruption in the supply chain has put a brake on the improving industry sentiment last month. As the festive period approaches, we are hopeful to see some improvement in semiconductor procurement. For the time being, we are taking all the measures to optimise the production and keep the waiting period of our vehicles in check,” said Hardeep Singh Brar, VP and Head of Sales & Marketing, Kia India.

Mahindra & Mahindra: 13,134 units / -12%
M&M’s September sales dropped 12 percent YoY to 13,134 units (September 2020: 14,857). While the company is already circumventing semiconductor crisis to minimise wait times on the Thar and XUV300, it could get challenging for the carmaker as it opens up bookings for the brand-new XUV700 on October 7.

According to Veejay Nakra, CEO, Automotive Division, M&M, “The challenges around the supply of semiconductors continues to pose difficulties for the auto industry globally. We have taken several steps to mitigate the effect and are working towards managing the situation as best as possible.”

With aggressive prices starting Rs 11.99 lakh and spreading all the way to Rs 21.59 lakh, ex-showroom, the XUV700 is being anticipated to bring a tough fight to the midsize SUV segment.

Toyota Kirloskar Motor: 9,284 units / +14%
Like Tata Motors, TKM has also been able to record an uptick of 14 percent to 9,284 units (September 2020: 8,116). While it announced to discontinue its midsized Sedan – Yaris – in the domestic market, TKM continues to witness strong growth in demand for the Innova Crysta MPV and Fortuner.

According to V Wiseline Sigamani, associate general manager, Sales and Strategic Marketing, TKM, “Demand in the personal mobility segment continues as we step into the festive months. Customer orders have been on a constant rise and we are witnessing a steady growth, ever since the second wave. The Crysta and the Fortuner continue to dominate their respective segments, both garnering huge customer interests and orders. All other segments have also attracted good traction from customers and we are very excited to cater to all such personal mobility needs of our customer, this upcoming festive season.”

Renault India: 7,326 units / -17%
The French carmaker clocked sales of 7,326 units, registering a YoY dip of 17 percent (September 2020: 8,805). The company’s sales are led by demand for the Kiger compact SUV, Triber MPV as well as Kwid, which all offer a high-value proposition to the customer in their respective price segments.

Honda Cars India: 6,765 units / -34%
Honda’s sales in September stood at 6,765 units, a YoY decline of 34 percent over last September’s 10,199 units. The company’s much in-demand models are the City and refreshed Amaze, but it is facing hurdles in streamlining production due to the global semiconductor shortage.

According to Rajesh Goel, SVP and Director, Marketing & Sales, HCIL, said, “On demand side, there is good momentum in the market with improved buying sentiment. However, the supply chain hurdles including the widespread chip shortage has been a big challenge right now for the industry, which impacted our production volume and despatches during last month. We will continue to align our production through our best efforts to tide over this shortage in the coming months.”

MG Motor India: 3,241 units / +28%
The carmaker registered retail sales of 3,241 units last month, recording a 28 percent YoY uptick over 2,537 units sold in September 2020. MG continues to see the Hector and Hector Plus continuing to be the key drivers of demand, while the ZS EV too aiding volumes with 600 fresh orders being claimed last month.

While it is targeting another 3,000 units every month from the new Astor crossover that is slated to be introduced this month, the semiconductor shortage is a worrying concern for the company.

“Our production has reduced by almost one-third due to the chip shortage. We expect this challenge to continue for the next few months. However, given the high number of bookings, we are trying our best to address the challenge and bring down the waiting period down to three months,” updated Rakesh Sidana, director, Sales, MG Motor India.

Skoda Auto India: 3,027 units / +131%
The Czech carmaker’s Indian arm sold 3,027 units in September, a 131 percent YoY uptick (September 2020: 1,312). The charge is clearly led by the all-new Skoda Kushaq midsize SUV, which is aiming to get Skoda a bigger chunk of the SUV pie by trying to compete against the Kia Seltos and Hyundai Creta. The company currently holds a 0.85 percent share of the Indian PV market.

According to Zac Hollis, Brand Director, Skoda Auto India said, “Skoda Auto India has managed to consolidate and move forward in September, despite the headwinds that the industry is facing in terms of some key components. We are confident of building our momentum, as we approach the festive season.”

Nissan Motor India: 2,816 units / +261%
The Japanese carmaker is sort of relishing a comeback with the success of its Magnite crossover that has enabled sales of 2,816 units last month, registering a substantial 261 percent growth over September 2020’s 780 units, when this new model was not introduced in the market yet.

Nissan Motor India claims surpassing over 65,000 cumulative bookings for the Magnite, with the challenge now shifting towards meeting the demand.

“The challenge has been on the supply side with shortages of semiconductors on which we continue to work with the supply chain partners to deliver more of the game-changing SUV - Nissan Magnite - to delight customers,” said Rakesh Srivastava, Managing Director, Nissan Motor India.

Volkswagen India: 2,563 units / +25%
The German carmaker’s Indian arm registered sales of 2,563 units last month, and growth of 25 percent compared to sales of 2,050 units in September 2020.

On September 23, the company introduced its all-new Taigun crossover in the midsize SUV segment, aimed to attract buyers with its introductory price tag of Rs 1,049,000. However, the company has serious competition from the likes of the Mahindra XUV700, Hyundai Creta and Kia Seltos.

Growth outlook
As we enter into the festive season with October, the demand for new cars could be at a high as the Covid situation in the country is reasonably under control so far. However, with Maruti Suzuki India announcing a prolonged production constraint at its factory due to the chip shortage, expect carmakers to grapple to keep pace with the new bookings. Industry believes the chip shortage is not likely to get sorted any time soon and is likely to extend well into 2021.