Tata Motors optimistic about overcoming semiconductors supply constraint

Homegrown auto major Tata Motors is optimistic that the supply constraint of semiconductors that has impacted its commercial vehicles production will be back to normal by the second half of the next fiscal, according to a senior company official.

The company, which had hiked prices in October and January to offset the impact of rising commodity rates, is looking at taking a similar step in April in the wake of continued increase in steel and other raw material prices.

"In H2 (second half of the ongoing fiscal), we have also seen the semiconductors becoming a major constraint. This is something which has actually affected us in the commercial vehicles (CVs) also," Tata Motors President Commercial Vehicle Business Unit Girish Wagh told PTI.

Stating that the semiconductor supply constraints started from November, he said, "We have seen some impact. Initially, it was on the small commercial vehicles (SCV) and later we have also seen some impact happening in medium and heavy commercial vehicles (M&HCV)."

In terms of actual impact on production, he said it varies from segment to segment with the "highest in SCVs and the least in I&LCV (intermediate and light commercial vehicles), and M&HCV is somewhere in between".

In order to overcome the challenge, the company has taken several steps, including engaging with suppliers, talking to semiconductor manufacturers to get some of the consignments faster or making some changes in the product configuration so that the requirement is reduced, he added.

When asked how long the issue is likely to continue, Wagh said, "As suppliers have indicated to us, the impact should go on gradually reducing. Therefore, from that perspective, I am looking at next (fiscal) year from an optimistic mindset...towards the end of Q2 and beginning of H2, we should be seeing the supply side completely on track but the situation is indeed very very dynamic..."

On commodity price increase, Wagh said it has been "quite significant this year, especially steel".

However, the company has worked on additional cost reduction, as it had done during the pandemic, besides passing on some of the burden to customers.

"There was a price hike in October and there was a price hike in January also. We are now monitoring the situation to see what happens going ahead for the next year...and looking at the current situation, we will also be looking at doing the same in the month of April when we get in the next year," he added.

Tata Motors will overcome the challenge of commodity price increase through a balance of pricing action and accelerating cost reduction, he added.

When asked about the growth prospects for the upcoming fiscal, Wagh said the CV industry is expected to grow over 30 per cent with favourable conditions outweighing negatives such as high fuel prices and uncertainty over the coronavirus pandemic, and Tata Motors will look to grow faster than the industry.

"We aim to grow our market share as part of strengthening our leadership position. Therefore, we aim to grow at a rate which is higher than the industry rate next year," he said.