Lingering chip shortage plagues auto production

NEW DELHI : The queue for passenger vehicles now has over 700,000 people in line, but automakers are unable to service the demand, thanks to the continuing global semiconductor shortage.

The chip shortage which was at its most acute in the third quarter of last fiscal, had begun to ease toward the second half of the year, though carmakers note that while the challenge has eased considerably since then, uncertainties in availability are causing a dip in monthly volumes and are expected to persist through the next year. “We have seen a 95-96% recovery in our production but some models are impacted due to chip shortages — including variants of the Swift, Baleno and XL6. We expect the situation should improve going forward — We see the fog clearing, but we can’t say when it’ll become normal,» Shashank Srivastava, executive director, Maruti Suzuki said.

Carmakers also haven’t had much success with launching de-featured variants of products as a measure to ship out product to mitigate the shortage of chips, as customers increasingly look for higher-end models.

“The semi-conductor situation has improved dramatically over the last 18 months, but challenges remain and we expect uncertainties will still loom through the next year,» a senior executive at Mahindra & Mahindra said.

Mahindra is preparing to launch its new electric SUV, XUV400, in January next year. It had 260,000 pending orders for its SUVs in the beginning of November.

Japanese automotive giant Toyota Motor Co. is adjusting its global production schedule by closing operations at four lines in three plants in Japan in December, to account for semiconductor and parts shortages as a result of resurgence in covid-19 cases in China and South Korea. It slashed production targets by 500,000 units for FY23 from 9.7 million to 9.2 million units to account for potential shortages.

Other supply chain snarls are also making the situation complex to navigate.

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