Semiconductor crisis keeps passenger vehicle sales in slow lane in November

Industry non-committal on time frame by which production will get to normal. Total Overall passenger vehicle sales during the month declined 14% YoY to 286,000 units

Notwithstanding robust demand, passenger vehicle (PV) sales in November remained in the slow lane. Semiconductor shortage continued to cripple production for manufacturers. With supply-side issues easing month-on-month, the worst seems to be behind, observe industry executives. They, however, remain non-committal on the time frame for production returning to normal. Overall PV sales during the month declined 14 per cent to 286,000 units, compared with 246,000 units a year ago, reveal industry estimates.  

PV sales rose 12.73 per cent in November 2020 to 285,367 units year-on-year (YoY), against 253,139 units in the same month in 2019.

Car market leader Maruti Suzuki India’s (MSIL’s) November sales in the domestic market slipped 19 per cent to 109,726 units, against 135,775 units in the same month last year, due to shortage of electronic components, the company said in a statement.

The overall sales in the PV segment were dragged down by the sale of the mini and compact models that saw volumes crimp to 74,492 units, against 98,969 units in the same month last year.

Before the outbreak of Covid-19 and the ensuing semiconductor shortage, MSIL on average was producing 140,000 cars every month. With chip shortage easing, ramp-up is now on course correction. The production at MSIL’s Haryana and Gujarat plants stood at 40 per cent of normal in September, improving to 60 per cent in October, 85 per cent in November, and around 82-85 per cent in December, says Shashank Srivastava, senior executive director–sales and marketing, MSIL.

“The semiconductor issue is getting better. We are still apprehensive about giving a time frame for things to get back to normal,” he adds.

The company has close to 250,000 bookings and almost nil stock in the factory — whatever it could produce has been sold, says Srivastava, adding, “demand continues to be very strong”.

Semiconductor shortage also chipped away the production at Hyundai Motor India (HMIL), leading to 24.2 per cent contraction in domestic sales. The local arm of the Korean carmaker sold 37,001 units in November this year, compared with 48,800 units last year.

“Unless there is a third wave in the chip-producing countries, the worst is over, but the shortage will persist,” says Puneet Gupta, director IHS Markit. It will take another year for the PV market in India to reach pre-pandemic levels, he adds.  

Tata Motors — which saw its PV sales jump 32 per cent to 28,027 units YoY — was one of the few manufacturers that saw its PV sales advance, despite chip shortage. Riding high on newly launched models like the Punch, the Tata group flagship has managed to narrow the sales gap with HMIL during the month.

Mahindra & Mahindra (M&M) and Toyota Kirloskar were the other two automakers that saw their sales advance YoY, despite supply-side constraints. They saw their sales increase 8 per cent and 53 per cent, respectively. The maker of the Scorpio and the Thar sold 19,384 units during the month, against 17,971 units in the same month last year.

“The demand remains strong across our product portfolio of sport utility vehicles, pick-ups, and small commercial vehicles. The issues around semiconductor-related parts continue to remain a challenge for the industry. We are monitoring the situation closely and taking appropriate steps,” says Veejay Nakra, chief executive officer, automotive division, M&M.

The chip shortage has been a blessing in disguise for companies with a smaller footprint. Led by new model launches, sales for Nissan Motor India and Škoda Auto increased sharply on a low base. “It’s an opportunity for companies that have been struggling to make a strong comeback,” says Gupta.  

Meanwhile, production at Honda Cars India and MG Motor India got adversely affected due to the chip issue, leading to a sales decline of 45 per cent and 40 per cent, respectively.

“Despite consistent demand in the market, supply-side issues remain a concern,” says Rajesh Goel, senior vice-president and director-marketing and sales, Honda Cars India. Honda had to resort to non-production days last month because of this. It has been selling its entire production stock during the last few months and making efforts to meet demand, he adds.