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Backlog, semiconductor shortage cause delays in automobile sector

BusinessBacklog, semiconductor shortage cause delays in automobile sector

New Delhi: As the festive season in India draws closer, automobile manufacturers in India are gearing up to wade their ways through the semiconductor chip shortage to meet the increasing demand of passenger vehicles in the country.
According to industry sources, there is a pending order book of eight lakh passenger vehicles in the country, meaning that about eight lakh people are in the queue to get their desired cars that they have booked for themselves. This huge pent-up backlog with the automobile manufacturers has created a major mismatch in the demand and supply of cars, resulting in long wait times for customers who wants to have their new cars.
Rajesh Menon, Director General of the Society of Indian Automobile Manufacturers (SIAM), told The Sunday Guardian, “Supplies of Semiconductor has comparatively improved but still the full requirement of manufacturer is not being met. Manufacturers are therefore planning their model mix to optimise their vehicle production based on semiconductors availability. Production has increased across industry and inventories are being built to address festive demand. But for few selected high demand models, impact due to semiconductors continue to be there.”
According to approximate figures, Maruti Suzuki, the largest auto manufacturer in India, in terms of volume of sales, has about 50% of the total backlogs in the auto industry. Maruti Suzuki approximately has about 4.25 lakh cars pending in their order books. Amongst which Brezza and Grand Vitara, their newly launched models have the highest demand in the market. Together, more than 1,40,000 orders of Brezza and Grand Vitara are with Maruti Suzuki at the moment.
Dealers of Maruti Suzuki in Delhi also says that one has to wait for about 10 to 12 weeks to get their new cars. However, this depends on the model of the car they are choosing to buy for themselves. Dealers also say that more sophisticated the model, the higher is the waiting time and this is due to the shortage of the semiconductor chips that are needed to manufacture these vehicles.
Shashank Srivastava, Executive Director, Sales and Marketing, Maruti Suzuki, told The Sunday Guardian, “The semiconductor situation is currently getting better and we are at our 94 to 95 percent of planned production. The situation was worst during August last year when we were at about 40% of our planned production and since then we have been increasing our production capacity, which increased to about 70% in October and to 90% in November last year, since then we have been getting better.
Shashank added that despite the situation easing out with time, the demand and bookings over the last one year has been pretty strong, which has led to the long wait time for customers to get a hand on their new vehicle. “We have been witnessing a massive demand over the last one year or so and therefore a huge number of bookings have come to us, but the production could not take place to meet this demand and as a result of this, a backlog has been created. We are working towards easing out this situation and the only way to do this is by increasing our production capacity, which we are already in the process.”
Mahindra’s newly launched Scorpio, is also witnessing a massive demand since its launch earlier this year and according to sources, there is a pending order of about 1,30,000 Mahindra Scorpio in the country. The South Korean auto manufacturer KIA is also throwing up a long wait time for customers who wants to get a hand on their new vehicle. According to auto dealers in Delhi, there is an approximate wait time of more than 75 weeks, which is about one and a half year to get your hands on the KIA car, after you book their vehicle.
“For KIA there is a maximum wait time 75 weeks and a minimum of six months. This is for almost all models of KIA cars in the city,” a KIA dealer executive from South Delhi told this correspondent. Asked why such a long waiting time and who would wait for a year to get a new vehicle, the KIA executive said, “There is a shortage of cars from the backend, what can we do? As dealers, we want to deliver the cars to our customers as soon as possible, but then if there is no supply, we have nothing to do.”
According to dealer sources, KIA approximately has about 1,25,000 pending bookings in the Indian market. The Sunday Guardian reached out to the press team of KIA India to seek a comment on the situation; however, this newspaper did not receive any reply till the time of going to the press.
The situation with the other major automobile manufacturers in India, like Hyundai, Tata Motor, Renault, are also similar. The Sunday Guardian spoke to several dealers of Hyundai and Tata Motors in Delhi and received a similar response that one has to wait for at least two months to get their booked vehicles delivered.
Tata Motors’ Nexon, Punch, Nexon EV, Tata Safari are some of the highest in demand cars, according to dealers. However, a Tata dealer from West Delhi said that Nexon EV has the longest waiting period, followed by Nexon and Safari, while Punch can be delivered to the customer within a month or so.
Responding to queries from The Sunday Guardian on when is the situation likely to improve, with regards to supply and the semiconductor chip shortage, a Tata Motors spokesperson told this newspaper, “The semiconductor situation is easing out but the situation remains uncertain in the short term. We continue to remain agile and flexible to the evolving situation and apply smart allocation across models to maximize production. We have also developed alternate architecture for the affected parts and collaborated with the supplier partners to fast track the de-risking measures.” Hyundai and Renault did not reply to the queries sent by this newspaper, till the time of going to the press. The mismatch in the demand and supply of passenger vehicles with backlogs piling up with automobile manufacturers began in 2020 when the world was witnessing the Covid-19 pandemic that led to a lockdown across the globe. The lockdown led to shutting shops across the world, and this impacted the supply chain for major auto companies which included the shortage of semiconductor chips, which although small, but a very important component used in the manufacturing of cars. Automobile manufacturers say that these semiconductor chips are majorly procured from Taiwan and Taiwan witnessed several lockdowns over the past two years, which impacted the production of these chips and therefore the delay in the final delivery of cars.

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