Chip shortage spoils the festival party of carmakers; backlog piles up to 5 lakh units

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The global chip shortage, which has disrupted electronic businesses around the world, is causing a major disruption in the Indian passenger vehicle market. According to the latest estimates, due to the unavailability of semiconductor chips, the cumulative backlog has now added up to 5 lakh units, that too at the peak of the festive season.

Automakers are now forced to tinker with their plans of launching different variants based on the availability of the chips. Market experts say that the supply-side issues could get more pronounced for CNG vehicles.

Growing backlog

According to a report in the Business Standard, Maruti Suzuki is the worst hit, contributing most to the backlog. Quoting Shashank Srivastava, executive director (sales and marketing) at Maruti, the report said Maruti Suzuki has a backlog of nearly 2.1 lakh units.

Maruti has been forced to take production cuts of 60% in September and 40% in October. Manufacturers typically build stocks in anticipation of strong demand during this festive season. However, this time they are finding it hard to match the demand with supply.

Hyundai is also finding it hard to meet production during the festive season. According to Tarun Garg, director of sales and marketing at Hyundai, the firm has a backlog of nearly 1 lakh units. He is quoted in the report as saying that a high degree of flexibility helped the firm’s plants meet the demand for multiple models and variants. The supply-side issues have also increased, according to Garg, due to the preference of customers for ‘smarter’ vehicles. He stated that over the past couple of years, the share of the top-end variant of i20 doubled to 36%. Woes for automakers

According to market experts, with customers likely to place their bookings during the auspicious days between Navaratri and Diwali, the gap between supply and demand is likely to get worse. Automakers feel that a lot of their sales figures may not translate into actual sales. Many expressed the possibility of customers, owing to long waiting periods, placing multiple bookings of different models with various brands only to pick one at the end.

Customers of other automotive companies such as Tata Motors, Mahindra & Mahindra, Mercedes Benz, and MG Motors, are also facing long waiting periods ranging from three months to 12 months.

According to the report, India’s passenger vehicle market has seen a loss of between 2.5 lakh to 3 lakh units owing to the shortage of chips. The report quoted Hemal Thakkar, director, Crisil Research, as saying that given the huge increase in demand for CNG variants, supply-side issues could get more pronounced