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Tuesday, October 26, 2021

Festive fireworks unlikely for auto sector amid chip shortage

Around 30% of automakers’ annual sales happen around Diwali. However, supply side constraints are going to play spoilsport now.

By: ENS Economic Bureau | New Delhi |
October 10, 2021 3:18:35 am
With shortage of semiconductors, almost all major passenger vehicle manufacturers have resorted to production cuts, which has led to long waiting for popular models.

Consumers who generally wait for Diwali to purchase new vehicles at attractive discounts and other freebies may be in for disappointment this year.

With shortage of semiconductors, almost all major passenger vehicle manufacturers have resorted to production cuts, which has led to long waiting for popular models. As a result, manufacturers and dealers are in no position to offer attractive discounts this Diwali. Sales around Diwali, generally referred to as festival season sales, are big for automakers as around 30 per cent of their annual sales happen around this period.

However, supply side constraints are going to play spoilsport now.Auto dealers had last month stated that retail sales during the festival season are going to be lacklustre because of chip shortage, which has slowed down the supply of popular models. They had said the inventory of variants that are in demand, such as Baleno, Ertiga, Brezza, Creta, etc, is continuing to dip. In fact, the inventory is the lowest this time as against other years. Normally, dealers stock huge inventories of more than a month in the run-up to the festival months.

Dealers said, “With manufacturers drastically cutting down productions due to unavailability of semiconductors and ABS chips, shortage of containers and high metal prices, customers for the first time may not get a vehicle of their choice and lucrative schemes during this festive season.”

Manufacturers and dealers said whatever little discounts will be on offer would be on some entry-level models, where the offers are anyway not very attractive since the prices are comparatively low. Basic entry-level models do not have many electronic components so chip shortage has not affected their output in a major way.

The wholesale despatches of passenger vehicles by Maruti Suzuki India, Hyundai Motor and Mahindra and Mahindra were severely hit in September due to the shortage of semiconductors.

The month of August also saw similar shortages and indications are that trend of subdued sales will continue, at least till December. FE

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