Wait for car models gets longer as chip shortage deepens in industry

Car dealers are losing 20 per cent of their monthly sales as models can't be supplied on time, says industry association.

If you were looking to drive home a new set of wheels a year ago, it probably would have been delivered to your front door quicker than a takeaway pizza. Not anymore. Along with the slow and frustrating journey of recovering from Covid, so is the waiting period to get the keys to your dream car.

For some models — a Mahindra Thar, for instance — the wait could extend up to 2022.

A global shortage of the semiconductor or microprocessing chip, which started off by biting a few automakers in October, is now an industrywide phenomenon, impacting everyone from Maruti Suzuki and Mahindra & Mahindra (M&M) to Kia Motors and Nissan Motor. 

Carmakers uses semiconductors in everything from power steering and brake sensors, to entertainment systems and parking cameras. The smarter cars get, the more chips they use.

If chips that power in-car dials or automatic braking are delayed, so will delivery.

It has thrown production schedules into disarray, making it impossible to get any model — old or new — off the ramp.

New model launches, economic recovery, and a strong preference for personal mobility, amid the Covid-19 pandemic, have been fuelling auto sales in the world’s fifth-largest automobile market. Ironically, automakers have failed to ratchet up despite rebound.

Take the case of M&M. The company is witnessing impressive momentum in demand for the Bolero, Scorpio, XUV300, and the Thar. It has a strong pipeline of bookings, says Veejay Nakra, chief executive, automotive division, M&M. However, it has “not been able to leverage this opportunity because of supply challenges”, rues Nakra, adding its models have an average waiting period of 30-45 days (depending on the model). For the off-roader Thar, the waiting period is up to 8-10 months.

Nakra says M&M is more specifically impacted because of a semiconductor supplier based in Malta.  “It is affecting production for a significant part of our product portfolio. The same electronic control unit supplier to us is not as badly impacted for some of our other products, such as heavy and light commercial vehicles,” he clarifies. He expects the issue to persist for the next two to three months.

Car dealers are losing 20 per cent of their monthly sales due to non-availability of models, revealed the Federation of Automobile Dealers Association.

Tata Motors — that has seen robust booking for its models — is in a similar quandary. Shailesh Chandra, president, passenger vehicle business unit at the firm, says the demand has continued to outstrip supply. This is despite the capacity of the company’s plants consistently increasing to almost double the output over the past 10 months.

“We continue to strongly enhance the supply chain to further increase output via better planning and closer coordination with suppliers.  Electronic component supplies are being diligently managed,” says Chandra.

Depending upon the variant, choice of colour, type of fuel, the waiting period for Tata’s line-up ranges between four weeks and 15 weeks, says Chandra.

Tarun Garg, director–sales and marketing at Hyundai Motor India, which is also struggling to meet demand, says Hyundai is “trying its best to optimise supplies”.

Analysts expect the demand-supply mismatch to continue through the year till new capacities for chip-making goes onstream. “One can also attribute the shortage to a faster-than-anticipated bounce-back in demand and an increasing share of electronic content per car,” says Puneet Gupta, director, IHS Markit.