Shortage Of Semiconductor Chips Makes Auto Manufacturers’ Life Difficult, Vehicles Become Pricier

The shortage is set to hamper the sales of automobiles this festive season

Despite decent demand for vehicles from the consumer end, all the automakers across the globe are facing a tough time. The worldwide shortage of semiconductor chips is a huge concern for auto manufacturers. And this also includes the automakers with a production base in India. The recent surge of delta variant of COVID-19 indicates that the shortage of semiconductor chips will not be ending anytime soon.

Many countries globally, especially Asian countries, have already faced the heat of the COVID-19 delta variant. This new variant of the pandemic will be hampering the production processes and supply chain management of all the automakers. Apart from hurdles in supply chain management, the use of semiconductor chips for the manufacturing of electronic items and gadgets has increased significantly. Due to consecutive lockdowns and acceptance of work-from-home culture, the demand for laptops, smartphones and other electronic items which use these chips too has witnessed an all-time high.

Both four-wheeler and two-wheeler manufacturers are already facing the crisis of semiconductor chips. These chips are used in their Electronic Control Unit (ECU) for various functions. In addition to this, the OEMs are also facing a hard time meeting the demands of other important components, such as plastics and wiring harnesses.

Semiconductor Chip Shortage Effect In India

Various automakers in India have taken measures to solve this problem at their own cost. India’s leading automaker Maruti Suzuki has already confirmed that it will cut its production by almost 60 per cent for the same reason. All the three manufacturing plants of Maruti Suzuki will be utilizing only 40 per cent of their total production capacity for September. Recent reports also state that this very reason might delay the launch of the all-new Maruti Celerio, which is all set for launch before the festive season.

Even Mahindra and Mahindra (M&M) has declared that it will be keeping all of its production capacities closed for seven days in the wake of a shortage of semiconductor chips. The homegrown SUV giant is already struggling to meet the peaking demands of its high selling Mahindra Thar. The list will soon see the addition of the upcoming Mahindra XUV700 and all-new Scorpio, which have already garnered high levels of interest from the Indian audience. Other carmakers like Hyundai, Tata Motors, Ford, Renault, Skoda and Volkswagen too have been facing the challenges that emerged due to the shortage of semiconductor chips.

The two-wheeler industry is also bearing the heat of this global crisis. One such example can be seen in the newly launched Royal Enfield Classic 350. The tripper navigation system in the Classic 350 is currently restricted only for top-spec variants and will be equipped in other variants once this crisis slows down.

The crisis of shortage of semiconductor chips has also resulted in an indirect increase in prices of other raw materials, which eventually has increased the production costs as well. Due to this, a majority of automakers have already decided to increase the prices of their products. It will hamper the business of all the automakers in the upcoming festive season when the vehicle purchasing sentiment in India is usually high.