Maruti Suzuki to continue to battle chip crisis in November

Passenger vehicle market leader Maruti Suzuki continues to feel the pressure of the shortage of semiconductors, which go into multiple electronics components. The carmaker has officially announced that its production will be impacted at both its Haryana and Gujarat manufacturing facilities, albeit to a lesser extent than in previous months.

In a statement, Maruti Suzuki has said: “Owing to a supply constraint of electronic components due to the semiconductor shortage situation, the company is expecting an adverse impact on vehicle production in the month of November’21 in both Haryana and its contract manufacturing company, Suzuki Motor Gujarat Private Limited (SMG) in Gujarat. Though the situation is quite dynamic, it is currently estimated that the total vehicle production volume across both locations could be around 85% of normal production.”

With the festive season underway, consumer sentiment up and Diwali three days away, a deterrent to smooth production would be the last thing Maruti Suzuki would have wanted. It’s a situation where its rivals are making the most of.  

In the second quarter of FY2022 (July-September 2021), the carmaker could not produce an estimated 116,000 vehicles due to the same electronics components shortage. As a result, the carmaker’s output in September was down by nearly 60 percent, this at a time when the festive season calls for speedy supplies to showrooms across the country.

Net profit plunges 65% in Q2 FY2022 due to commodity price increases
The semiconductor crisis is not the sole issue hurting the company. Other headwinds include sharply rising commodity prices which have seen Maruti Suzuki hikes prices at least thrice in the year to date. However, this has not helped proditability.

In monetary terms, Maruti's net sales during Q2 FY2022 stood at Rs 19,279 crore compared to net sales of Rs 17,689 crore in Q2 FY2021, up 9% year on year. “This quarter was also marked by an unprecedented increase in the prices of commodities like steel, aluminium and precious metals within a span of one year,” Maruti said in a regulatory filing. The company said that it made maximum efforts to absorb input cost increases offsetting them through cost reduction and passed on minimum impact to customers by way of car price increase. Due to this, the company’s net profit plunged 65% to Rs 475 crore in Q2 FY2022 (Q2 FY2021: Rs 1,371 crore.).

Maruti Suzuki, which sells one out of every two cars in India, was able to sell 379,541 units during Q2 FY2022, down 3.4% (Q2 FY2021: 393,130). Of this total, domestic market sales comprised 320,133 units, down 13.6% (Q2 FY2021: 393,130). Exports though were up and clocked 59,408 units, up 164% (Q2 FY2021: 22,511) and the highest ever in any quarter for the Gurugram-headquartered company.