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Longer waiting period to dent auto sector growth
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SME Times News Bureau | 22 Aug, 2021
The global shortage for semiconductors triggered by the Covid
pandemic-induced supply hurdles as well as healthy demand is expected to
dent the auto sector's growth in FY22.
The phenomenon has been
blamed on the exponential rise in demand for personal electronics such
as cellphones and laptops during the ongoing pandemic.
On
technical basis, semiconductors play a critical part in the production
of internal combustion engines. They are an integral part of all kinds
of sensors and controls in any vehicle.
Industry insiders fear that the semiconductor shortage will extend waiting periods as well as escalate prices.
These shortages are expected to impact the industry's production levels in the near term.
At
present, these shortages have forced several OEMs to slow down
production, thus, further extending the waiting periods of popular,
feature-rich and high-end models.
"Production schedules of
several vehicle manufacturers have been impacted due to the shortage of
semiconductors to the Tier 1 and Tier 2 suppliers of OEMs, as some of
their key suppliers have expressed their inability to supply these
components in required quantity used in 'Vehicle's Engine ECU',
'Keyless' entry and 'ABS' systems," said Rajesh Menon, Director General,
SIAM.
"The industry has been in touch with a couple of
semiconductor suppliers globally and it is expected that the
manufacturing would be ramped up after some disruptions these companies
have faced in the later part of 2020 and early 2021. However, it is
expected that the demand for semiconductors would continue to rise," he
added.
Besides, Menon also cited an immense opportunity in India for the manufacturers of semiconductors.
On
its part, Tata Motors has been taking appropriate measures through
planning and close coordination with the suppliers to mitigate the
impact on production.
"We are constantly striving for better
visibility across our multi-tier supply chain to manage lead time
sensitivity. We are following a multi-pronged approach like procuring
chipsets from the open market, managing our model or trim mix, use of
alternative chips etc. to best mitigate the supply side risks," Shailesh
Chandra, President (Passenger Vehicles), Tata Motors, said.
"However,
apart from chip capacity issues, certain disruptions in other parts of
the world, like the recent lockdown in Malaysia, continues to keep the
supply environment uncertain," he added.
Another auto major, Hyundai Motors India, is monitoring the situation closely to maintain production continuity.
"We
have been consistently coordinating with the HMC team as this shortage
is a global issue and not India specific. We are monitoring the
situation closely to maintain production continuity," an official
spokesperson of Hyundai Motors India told IANS.
According to Sridhar V, Partner, Grant Thornton Bharat LLP, the growth of the auto sector might be hampered due to the shortage.
"This
appears to be a problem for a longer term unless new capacities are
created or alternate supplies are identified. Certainly, it is an issue
which could impact growth in the auto sector," Sridhar said.
The
Vice President of ICRA, Ashish Modani, said the impact of the shortages
is likely to continue till Q4 of the present calendar year.
"Covid
2.0 related production disruptions masked the real pain of the Indian
automobile industry during Q1 of FY2022. With recovery in volume since
July 2021, the domestic OEMs have acknowledged the impact of
semiconductor shortage.
"The industry participants expect
production loss of over 1 lakh units during Q2 FY2022; however, given
the spillover of the issue during Q3 FY2022, the overall impact could be
even higher for the full year," Modani said.
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