A friend recently booked a new car for herself, yet was glum when she shared the news with me. When I asked her why, she said that her dejection was because car will be delivered in November 2023 – 10 months after the booking date. I could not help but inform her that most automotive companies are staring at a long road to delivery as open orders as of February 2023 range between 700,000 and 720,000 units, with waiting periods for some models stretching into more than a year.
The waiting period is a disappointment to the customers and auto companies alike. The reason Manufacturers lose out on revenue due to shortage of semiconductor chips, having a deadly impact on the production capacities. Imagine – Maruti Suzuki India (MSIL) could only produce 700 units of the Ciaz, its midsize sedan, in February, leading to sales of 792 units. Maruti suffered a 58.5% drop year-on-year.
But maybe all is not that bad. Shashank Srivastava, Senior Executive Officer (Marketing and Sales), MSIL said that even though the company doesn’t have clarity on its production estimates for March yet, weekly updates on semiconductor chip obtainability.
The situation is similar for most major car manufacturers in India. For MSIL, out of the 700,000 units under open bookings, it has only 369,000 units of pending deliveries. Mahindra & Mahindra (M&M) will have open bookings of 200,000 units, followed by Tata Motors at 100,000-125,000 units. The semiconductor shortage has most of its impact on high-end models which require a lot of them to be embedded at the time of production. Due to this bookings seem to be overflowing much more than the amount of supply that can be pushed out of the factories.
Mercedes-Benz’s sport utility vehicle (SUV) — the AMG G63 — has a waiting period of 12-16 months, whereas, for the GLS Maybach, the wait is eight months. Santosh Iyer, MD and CEO, Mercedes-Benz India, says, “The unavailability of parts continues to pose a significant challenge, although we have ramped up production to meet rising market demand. We have a healthy order bank currently. However, the unavailability of parts and semiconductor shortage, leading to a prolonged waiting period, may affect in the short run.”
“January saw record-high registrations,” Manish Raj Singhania, President, Federation of Automobile Dealers Associations says, adding that some manufacturers, including Tata Motors, have handled the semiconductor shortage rather adeptly. If word is to be believed, Tata Motors has been buying semi-conductors at higher prices to have minimum impact on its production.
Analysts say that the issue is more pronounced in premium cars, sedans, utility vehicles, multi-purpose vehicles, and premium hatchbacks, especially the top-end variants and auto gear shift (AGS) variants and automated manual transmission (AMT) of all these models. AGS and AMT versions of all vehicles of MSIL attract higher waiting periods of four to six months, sources tell.
Ultimately, with little visibility on the supply of components, automakers stare at a long road to delivering the pending order book.
