Chip shortage leads to nearly 500,000 units of car booking backlog: Report

Semiconductors or silicon chips are used in internal combustion engines, digital speedometers, infotainment and driver assistance systems. A global shortage of microchips has been caused by supply chain disruptions due to the pandemic, a steep rise in demand for electronic goods which also use semiconductor chips, and a lack of investment in chip manufacturing capacities.

The crisis has hurt the car making industry, forcing them to make production cuts and extend waiting periods.

"The challenges around the supply of semiconductors continue to pose difficulties for the auto industry globally. We have taken several steps to mitigate the effect and are working towards managing the situation as best as possible," M&M automotive division CEO Veejay Nakra told PTI.

Higher trim models require more semiconductors as they are packed with features. This is also leading to a rise in demand for microchips by automakers.

“As the customer is spending a lot more time with the automobile, she wants a variant that is smart, connected and packed with features,” Tarun Garg, director of sales and marketing at Hyundai Motor India told Business Standard.

Analysts say that the shortage will affect sales beyond the festive season. “The supply-side issues that are most pronounced for chips now may get extended to other parts and aggregates like CNG kits and gaskets in the near future, given the disproportionate increase in demand the CNG variants one has seen in the recent past. Supply-related glitches are here to stay,” Hemal Thakkar, director, Crisil Research, told Business Standard.

At present, buyers are booking multiple brands due to the long waiting period, but would eventually buy one car. Hence, though the booking orders are high, it is not a true reflection of demand.

Maruti Suzuki has the highest backlog with close to 210,000 units of bookings of Brezza and Alto, according to Shashank Srivastava, executive director (sales and marketing) at the firm.

Hyundai Motor India has a backlog of 100,000 cars waiting to be delivered.

Meanwhile, despite supply chain issues, Tata Motors, Toyota Kirloskar Motor, Nissan and Skoda have reported a rise in passenger vehicle dispatches in September.

The total passenger vehicle sales for Tata Motors were 25,730 units in September compared to 21,199 last year.

"Looking ahead, the demand for cars and SUVs is expected to remain strong in the forthcoming festive season; however, the supply situation for electronic components may continue to witness challenging times," Tata Motors president (passenger vehicles business unit) Shailesh Chandra told PTI.