Pricol wary as chip crisis worsens 

by Shahkar Abidi  23 Aug 2021


Vikram Mohan: “What is even more worrisome than Covid-19 is the acute shortage of electronic components which is not showing any signs of easing and is affecting various stakeholders.”

Coimbatore-based Pricol, which uses microchips for its electronic parts, is feeling the heat of the semiconductor shortage. With the crisis expected to last another 16-18 months, it may act as a dampener during the festive season when demand is generally high between October and December.

“What is even more worrisome than Covid-19 is the acute shortage of electronic components which is not showing any signs of easing and is affecting various stakeholders,” said Vikram Mohan, Managing Director. As a result, the situation remains volatile and makes any production forecast difficult both for OEMs and ancillary suppliers.

According to him, the shortage of circuitry has led to prices shooting up two to 10 times in the past few months which has been a huge blow to buyers. Additionally, the time taken from order to delivery has jumped to 12-18 months from just a few months earlier. 

Likewise, the average inventory levels have increased from a month to about three months with companies looking to insulate themselves from prolonged shortages. This has increased their working capital needs. 

Pricol has managed to pass on nearly 70 percent of this price hike to its OEM customers but has had to absorb the balance which, in turn, has dented its margins by over two percent. It has now deferred its revenue target of Rs 2,100-2,200 crore by over a year to FY2023-2024, the time when it has lined up around Rs 150-200 crore  investments for developing new systems.

Pricol’s two-wheeler clientele includes Hero MotoCorp, TVS Motor and Bajaj Auto while Tata Motors, Ashok Leyland and VE Commercial Vehicles are the key commercial vehicle customers. In tractors, it meets the needs of Mahindra & Mahindra, Swaraj and TAFE.

Over the last three years, Pricol's share in driver information systems for two-wheelers has increased from 35 percent to about 53 percent and from 50 percent to 80 percent in commercial vehicles. In passenger cars, where it is now beginning to make its presence, its market share is already close to 10 percent.

Mohan said the company’s Indonesian subsidiary has been hit by the pandemic but has still begun supplying parts to Harley Davidson and BMW thanks largely to a free trade pact with the US. Going forward, this arm will play a big role for Pricol.