Chip shortage may lead to production loss of 175,000 units or Rs 11,000 crore for Maruti Suzuki in FY2023

Maruti Suzuki, India’s largest car maker, continues to face disruption in supplies of semiconductor chips. As a result of this, the company has now issued a guidance for higher impact in March 2023 than what it experienced in February.

According to a number of people in the know, Maruti Suzuki’s production this month is likely to be impacted by 25,000 to 40,000 units. As against the production plan of 195,000 units for March 2023, Maruti Suzuki is likely to produce about 155,000 to 170,000 in the best-case scenario.

Autocar Professional also learns that Maruti Suzuki would have incurred a production loss of between 175,000 to 185,000 units for all of FY2023, leading to a foregone revenue of Rs 10,000 crore to Rs 11,000 crore in the current financial year. This constitutes an annual production loss of 8-9 percent. The company had lost output of about 270,000 units in FY2022 due to the chip shortage.

Continued disruption in chip supplies means Maruti Suzuki would have lost an estimated production of around 450,000 units over FY2022 and FY2023.

Reduced production impacting market share

Over the past two fiscals (FY2022 and FY2023), India's passenger vehicle market leader would have cumulatively lost production of about 450,000 units. This, in a way, also defines the company's very large booking backlog of 378,000 units and lower market share, given the fact that the more agile rivals like Tata Motors and Mahindra & Mahindra have managed their semiconductor chip supply scenario better.

A further disruption would mean Maruti Suzuki may not be able to attain the 2 million units sales target for FY2023.

Maruti Suzuki in its statement to stock exchange on Wednesday said, “The shortage of electronic components had a minor impact on the production of vehicles during February 23. It is expected that the shortage of electronic components may have an impact on March 23 production more than that in the recent months. The company is taking all possible measures to minimize the impact.”     

An email sent to Maruti Suzuki did not elicit any response.

In the first quarter of FY2023, Maruti Suzuki saw a production loss of 51,000 units, followed by 35,000 units in Q2, and 46,000 units in Q3. Q4 FY2023's reduced output is expected to be around 40,000 to 50,000 units, resulting in a cumulative production loss of 172,000 to 182,000 units for the whole of FY23 on account of the chip shortage.  

In the Q3 analyst conference call, a Maruti Suzuki official said the limited visibility on availability of electronics components is a challenge in planning production.

“The electronics component shortages are still limiting our production volumes. Our supply chain, engineering, production and sales teams are working towards maximizing the production volume from available semi-conductors. The supply situation of electronic components continues to remain unpredictable,” the official added.

Citing the helplessness of the situation, which has impacted every car maker in the world, the senior company executive told analysts in January, “That’s a lot of dynamism and uncertainty in this, it’s quite random and we are takers in this market, can’t do much about it.”  

Maruti Suzuki on its part is making a lot of effort in reducing the requirement of semiconductors to the bare minimum and commonising across platforms.

“We use a higher specification, the highest common work. So, there we are going variant-wise and reducing the semiconductor requirements so that the same number of semiconductors can service more cars. So, all those kinds of efforts, de-population, value engineering et cetera we are doing from our end. Of course, we are trying to get maximum from the market and our suppliers,” added the executive, commenting on the initiatives taken by the company so far to address the challenges of shortage of parts. Stay tuned for more updates on this front. 

ALSO READ:

Car and SUV sales surpass 300,000 units for eighth time in 11 months of FY2023

Tata Motors, Maruti Suzuki and Mahindra battle for UV leadership in FY2023