Business Standard

Car booking backlog nears 500,000 units

Chip shortage disrupts production plans

- SHALLY SETH MOHILE

Ahead of the peak festive season, India's passenger vehicle makers are staring at a cumulative order backlog of nearly 500,000 units as chip shortage continues to cripple production.

The crisis is forcing companies to change their production plans frequently and take a call on the variants they can manufactur­e based on the availabili­ty of semiconduc­tors.

The booking numbers are not a true reflection of demand, said manufactur­ers. Owing to long waiting periods, which are only getting stretched, buyers are booking multiple brands, and not all of it would translate into sales. A buyer may book models of three different brands, but eventually he or she would buy only one, explained an executive of a car manufactur­er. The huge pile of bookings indicates a yawning gap between demand and supply facing the world’s fifth-largest auto market due to the shortage of semiconduc­tors. If anything, the situation is set to worsen as more buyers rush to book vehicles ahead of the auspicious days of Navratri, Dussehera, and Diwali.

Car market leader Maruti Suzuki India contribute­s the maximum to the backlog. The maker of Brezza and Alto models has bookings of close to 210,000 units, said Shashank Srivastava, executive director (sales and marketing) at the firm. The chip crisis forced Maruti to take steep production cuts of 60 per cent and 40 per cent in September and October, respective­ly. “Typically, manufactur­ers build stock at the channels during the Shradh period. This is in anticipati­on of strong retail demand during Navratri and Diwali. But this time, one is finding it tough to fill the channels as demand is far higher than supply,” said Srivastava.

The situation at Hyundai Motor India is only marginally better. The Korean carmaker has 100,000 customers waiting for their cars to be delivered. Tarun Garg, director of sales and marketing at the firm, said a high degree of flexibilit­y at the plants in manufactur­ing a model or variant had helped the company to avoid shutdowns.

Analysts warn of a bumpier road ahead. Cumulative­ly, since the beginning of this financial year, India’s passenger vehicle market has seen sales loss of 250,000 to 300,000 units due to chip shortage, said Hemal Thakkar, director, CRISIL Research.

According to Hyundai’s Garg, a strong preference for higher trim models, which are packed with features and therefore use more semiconduc­tors, is also accentuati­ng the shortage.

Tata Motors, Mahindra & Mahindra, Mercedes Benz, and MG Motors, among others, face a similar predicamen­t. The waiting period for models at all these firms ranges from three months to 12 months, depending on the model and variant mix.

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