Semiconductor shortage chips into car sales in August

Domestic sales in the passenger vehicle (PV) segment in India took a beating in August 2021, what with carmakers grappling with the ongoing global semiconductor shortage, which has compelled companies to cut production due to unavailability of electronic chips.

Carmakers such as Maruti Suzuki India have reported an 8.71 percent drop in wholesales to dealers but the problem is set to exacerbate with India’s largest carmaker already announcing a significant reduction of 60 percent in production for September.

This vexing issue is chipping away at OEMs' fortunes at a time when the PV industry was just about beginning to see better times. Speaking to Autocar Professional, FADA president Vinkesh Gulati said the on-ground demand for new cars is only growing but will now witness sales speedbreakers in the form of long waiting periods. The chip shortage has already created a waiting period between two and eight months on models, across manufacturers, he said.

Cumulative sales of 10 manufacturers at 246,096 units point to 12% year-on-year growth but the industry knows this increase could have been much more, given that PV sales in July 2021 were 264,442 units and the growth road was looking good at that stage. Here's looking at the manufacturer-wise wholesales numbers for August:

Maruti Suzuki India: 103,187 units / -8.71%
The bellwether of the Indian PV industry clocked sales of 103,187 units last month (August 2020: 113,033 / -8.71%) after taking measures to limit the adverse impact of the semiconductor shortage on its production.

The entry-level duo of the Alto and S-Presso went home to 20,461 buyers (August 2020: 19,709 / +3.81%), while the pack of Wagon R, Swift, Baleno, Celerio, Ignis, Dzire and Tour S saw combined sales of 45,577 units – a notable 26.43 percent year-on-year (YoY) decline compared to sales of 61,956 units in the same month last year.

The SUV range, however, registered an uptick with total sales across the Ertiga, Vitara Brezza, S-Cross, XL6 and Gypsy reaching 24,337 units (21,030 / +15.72%). The Ciaz sedan at 2,146 units almost doubled its performance.

Hyundai Motor India: 46,866 units / +2.30%
No. 2 domestic carmaker by sales volumes, HMIL registered sales of 46,866 units last month, a marginal improvement over 45,809 units clocked in the previous year.

While the company is witnessing unwavering demand for some of its models such as the Creta and i20, it is not insulated from the semiconductor shortage. In a recent interview with Autocar Professional, Tarun Garg, director, Marketing, Sales and Service, said, “We are part of the global supply chain and have also been affected by the shortage. But we have been able to mitigate the impact as much as possible by combined efforts of our vendors. We are in consistent touch with them.”

The company is all set to introduce its N Line performance brand in India with the launch of the i20 N Line this festive season.

Tata Motors: 28,018 units / +50.77%
Tata Motors' domestic sales were 28,018 units last month, registering a significant 51 percent YoY growth over the 18,583 units sold in August 2020. Tata’s EV sales, however, crossed the 1,000-unit mark for the first time with sales of 1,022 units (306 / +234%).The company also launched its updated Tigor EV with a 306km certified range on August 31.

However, there’s a month-on-month drop of 7 percent, owing particularly to the semiconductor shortage. The company has cautioned severity in the coming months and said in a press statement, “The recent lockdowns in East Asia have worsened the supply situation and hence, Tata Motors is forced to moderate production and offtake volumes in the coming months.”

“The situation is fluid and we will continue to work to mitigate the impact of this and aim to meet our customer orders through an agile, multi-pronged approach including close engagement with our extended supply chain partners, procuring chip sets from the open market, using alternate chips and managing our model and trim mix,” it added.

Kia India: 16,750 / +55%
Kia India clocked sales of 16,750 units in August, registering a significant 54.5 percent YoY growth (August 2020: 10,845). The company has launched the special edition X Line version of its popular Seltos SUV, which contributed 8,619 to August numbers. The Sonet compact crossover sold 7,752 units, with the remaining 379 units coming in from the Carnival MPV.

According to Tae-Jin Park, executive director and Chief Sales and Business Strategy Officer, Kia India, "August was a month of multiple milestones for us and has given healthy sales numbers. Our products have been faring very well. In CY2021, we have sold almost 130,000 vehicles till now, with an average of over 16,000 vehicles per month. With the festive season around the corner, we are anticipating a further rise in this number. To cater to the pent-up and upcoming demand of our vehicles, we are taking appropriate measures to enhance the production output.”

Mahindra & Mahindra (15,973 / +17%)
UV maker Mahindra & Mahindra (M&M) despatched 15,973 units to dealers last month (13,651 / +17%). While the company was already getting good traction for its products including the XUV300, Scorpio, Bolero Pik-up and recently-introduced Bolero Neo, it launched the flagship XUV700 on August 15, which is set to attract more buyers in the midsize SUV segment with its attractive pricing.

However, the cars will reach showrooms only in October but bookings have been commenced. M&M is also the one with a notable impact of the semiconductor crisis as the UV maker’s portfolio is inclined towards diesel and it is this fuel type that is suffering more as per FADA, due to higher concentration of chips including in the after-treatment system to meet the BS VI emission norms.

According to Veejay Nakra, CEO, Automotive Division, M&M, “Supply of semiconductors continues to be a global issue for the auto industry and has been a major area of focus for us.”

Toyota Kirloskar Motor: 12,772 units / +130%
Toyota Kirloskar Motor (TKM) registered total domestic despatches of 12,772 units (5,555 / +130%). Being based out of Karnataka, TKM was severely impacted during the second Covid wave earlier this year from April through to June and is now on a compensation journey. Its updated Fortuner and Innova Crysta continue to witness strong demand in their respective segments, while the Urban Cruiser and Glanza tend to engage with the buyer at the lower end of the market.

According to V Wiseline Sigamani, AGM, Sales and Strategic Marketing, TKM, “We are witnessing a steady growth after the second wave and the trend continues in August as well. Customer orders are healthy, and the retail sales have shown an improvement as compared to last month. The segment dominance of Innova Crysta and Fortuner continues, as both the models have recorded good demand and witnessing growing sales in their respective segments.Glanza and Urban Cruiser also continue to garner sustained sales.”

“We expect the positive demand trend to continue due to the resumption of economic activity, uptick in personal mobility and overall improvement in market sentiment. As the festive season draws closer, and to meet the expectation and convenience of our customers, we are making every effort to offer better services, enhance digitalisation of our sales operations with efforts like Toyota ‘Virtual Showroom’ and reduce delivery time,” he added.

Honda Cars India: 11,177 units / +49%
Japanese carmaker’s Indian subsidiary, Honda Cars India registered sales of 11,177 units last month (7,509 / +49%). The company introduced its updated Amaze compact sedan in August to create excitement to its sedan portfolio. The Amaze comprised 6,591 units of total August sales of the company.

According to Rajesh Goel, SVP anddirector, Marketing and Sales, Honda Cars India, “Positive sales momentum and overall strong demand helped us to achieve good volumes with onset of the festive season. The celebratory fervour which began with Onam in Southern India will extend to rest of the markets as we move towards the peak of festivities.”

“While we are quite optimistic on demand side going forward, we are carefully monitoring the prevailing supply side issues affecting the industry and any future Covid-related disruptions,” Goel added.

MG Motor India: 4,315 units / +51.4%
MG Motor India recorded sales of 4,315 units last month – a notable 51 percent uptick over 2,851 units sold in August last year. The company says the demand is strong for its entire model range, including the Hector and Hector Plus siblings, Gloster, and ZS EV. It is now gearing up to introduce the Astor midsize SUV later this month.

According to Rakesh Sidana, director, Sales, MG Motor India, “The higher momentum has continued for all our three models. We are witnessing busy dealerships, eagerly seeking more inventory.”

“However, the severe shortage of chips is expected to continue till the end of the year, leading to production constraints. We expect manufacturing in September to be severely impacted, which will be lower than August. We are trying our best to mobilise global resources to enhance the pace of production to meet customer demand during the festival season,” he commented.

Skoda Auto India: 3,829 units / +282%
Czech carmaker has commenced its revival stint in the Indian automobile space with the recent launch of its midsize SUV – Skoda Kushaq. The crossover is enabling Skoda to grow its monthly sales volumes, clearly evident from August numbers – 3,829 units (1,003 / +281.8%).

Apart from this mass-market SUV, the flagship Superb sedan, Octavia and Rapid too have aided to Skoda’s August numbers.

According to Zac Hollis, brand director, Skoda Auto India, “Our August sales have grown significantly and reflect the increasing popularity of the Skoda brand in India. This market is important for the global growth ambitions of the brand and we have a detailed strategy to strengthen our presence here. Along with our focused product strategy, we have taken several measures towards building a strong bond with our customers and improving the overall brand experience. We have exciting plans going forward and will continue to work towards our core objective of creating customer delight.”

Nissan Motor India: 3,209 units / +296%
The Japanese carmaker’s despatches to dealers totaled 3,209 units – a marked improvement over August 2020’s 810 units when its game-changer SUV – Nissan Magnite – was not part of its domestic portfolio.

The Magnite that plays in the sub-Rs 10 lakh price bracket and was launched in December 2020, has inched over 60,000 bookings as per the company, so far.

“With the start of the festive season, customer sentiments are positive with increasing inflow of bookings, the challenge is on the supply side with shortages & increased lead time of semi-conductors supply impacting the availability of vehicles. We foresee this challenge to continue during the coming months while we continue to work with the supply chain in an endeavour to deliver more Nissan Magnite SUVs to customers at the earliest,” said Rakesh Srivastava, managing director, Nissan Motor India.

Growth outlook: sales chip-wrecked?
The semiconductor shortage is bad news for the Indian automobile industry, as it is for global OEMs. Just when the PV market was seeing sustained momentum, growing supply chain issues of unavailability of chips, which are increasingly required to deliver high levels of infotainment and connectivity in vehicles, are proving to be a sales speedbreaker.

Most of the top PV players are impacted by this chip shortage and are rejigging their production schedules to ensure their popular and much-in-demand models are sent to dealers, ready for the festive season which begins this month. Long waiting periods are a deterrence to vehicle ownership, which is also why the used car market is currently witnessing a huge boom.

How long will the chip crisis last is anybody’s guess but with global suppliers like Taiwan’s TSMC saying that it would last well into 2022, the writing is clearly on the wall. A demand-supply mismatch that is just not good news for India Auto Inc, more so when consumers are ready and willing to spend during the festive season.