Don’t miss the latest developments in business and finance.

Auto manufacturers stare at supply outages amid shortage of semi-conductors

Mahindra and Mahindra is one of the firms that Bosch counts as a key customer. In a late evening notification to the stock exchange

maruti suzuki, cars, automobile
Most of the other carmakers steered away from diesel technology for mass segment ahead of the transition to BSVI.
Shally Seth Mohile Mumbai
3 min read Last Updated : Dec 11 2020 | 11:36 AM IST
A shortage of semi-conductors (micro processors) a critical cmponent that is used in the manufacturing of electronic control unit (ECUs), is set to disrupt the production at auto firms in India. This comes at a time when demand in world’s fifth largest auto market is in the initial stage of recovery after the Coronavirus (Covid-19) pandemic induced lockdown earlier this year.

Following a rapid recovery in demand for discretionary items including electronics and automobiles, demand for semi-conductors has outstripped supplies, leading to a shortage. In India, Bosch and Continental are the largest suppliers of ECUs to automakers. An ECU is an embedded system that controls electrical sub-systems in a vehicle.

Puneet Gupta, associate director at IHS Markit, said automakers with a diesel led portfolio are likely to experience a greater impact. “Owing to a shorter development cycle for transition from BSIV to BSVI, they were dependent on indirect imports (through suppliers) from China, Korea and other countries of the ECUs in the BSVI diesel engines,” he said.

Mahindra and Mahindra is one of the firms that Bosch counts as a key customer. In a late evening notification to the stock exchange on Wednesday, the maker of Scorpio and XUV 300 models said that volumes at company’s automotive sector are likely to contract owing to the shortage facing Bosch.

“The operations of the company in the automotive sector will be affected by the global supply shortage of micro-processors (semiconductors) used in ECUs which are supplied by Bosch,” Mahindra said in the statement.

This, it added, is estimated to result in reduction in production/sales volume in the last quarter of FY21. M&M is engaging closely with Bosch and assessing likely production loss and steps to be taken to minimise the impact of the same, it said.

Apart from Mahindra, Tata Motors is another firm that has a diesel led portfolio. Most of the other carmakers steered away from diesel technology for mass segment ahead of the transition to BSVI. A spokesperson at Tata Motors declined to comment for the story. “We haven’t seen any supply related disruption as of now,” said a source at Tata Motors. The company sources ECUs both from Continental and Bosch.

M&M’s statement followed the notification to the exchanges by the local arm of the German component maker. The demand in the consumer electronics industry has seen steep escalations driven by safety and hygiene sentiments as well as the rise of 5G connectivity, Bosch said in a statement on Tuesday.

As a result, “Imports of Bosch has been impacted with severe supply shortage for imported micro-processors (semiconductors), leading to reduced ability to deliver to the automotive market demand in India.”

A spokesperson at Continental, another key supplier of ECUs to auto firms, said, “This spike in demand has resulted in a supply shortage in the industry for semi-conductors, given the usual lead time (6 to 9 months) the industry needs to meet the requirements,” the spokesperson said in a statement cautioning that the “potential delivery bottlenecks may last into 2021.”  

Semiconductor manufacturers have already responded to the unexpected demand with capacity expansions, he added.

Nirmal K Minda, chairman of Minda Industries that makes controls, switches, lights among host of other parts, conceded “The lead time” has increased but his company is managing it with the help of its collaborators. “The electronic content per car has been going up year on year,” said Minda, adding that it be it switches, controls, brakes lights, or other things,  it’s intrinsic to a car. “We hope the supplies catch up with demand sooner than later,” he said.

Topics :auto demandautomobile industryautomobile manufacturer

Next Story