FADA: Semiconductor crisis to hurt festive season auto sales

Tuhin Guha Published: September 07, 2021, 11:43 AM IST

The latest monthly retail sales report for August 2021 from the Federation of Automobile Dealers Associations paints a grim picture for the upcoming festive season. The Indian automobile industry seems to now be fully in the grips of the global semiconductor crisis with the dealer body predicting a significant supply gap over the next few months.

In contrast to last year where the lockdowns dried up demand for cars and SUVs, the sales numbers for August 2021 have been encouraging with over 1.92 lakh units being sold. This is a significant 38.71 per cent increase over the same month last year and a still significant 31.67 per cent growth over August 2019, still a depressed baseline but with none of the COVID-related demand issues.

Photo by Ryan Searle on Unsplash

Despite these gains, the outlook among dealers for the festive season isn't one of confidence. Only 44.9 per cent of dealers were hopefully of a good run with 40.4 per cent remaining neutral and the rest rating the outlook as bleak. FADA says this is down to a gap in the supply of fast-moving variants due to the chip shortage. Manufacturers across the board have had to cut production to cover for this crisis which will lead prospective owners to not have access to their choice of variants in the peak sales period of the year. Dealers are faced with their lowest inventory levels so far in the financial year, which should lead to long waiting periods and fewer discounts for prospective buyers. The average inventory levels for passenger vehicles stood at 25-30 days in July.

In terms of manufacturers' sales performance, Maruti Suzuki and Hyundai have seen their market share eroded in August 2021. Maruti Suzuki's share dropped to 43 per cent from 49.57 per cent last year despite an overall sales increase. This is the most significant change among all firms while Hyundai has also seen its share reduce by around 2 per cent from last year. Tata Motors has been the biggest gainer, followed by Mahindra and Toyota Kirloskar Motor. Mercedes-Benz remains the largest luxury car maker.

Also read,

Short Circuit: How the global semiconductor shortage has affected the auto industry

Maruti Suzuki call for a mass recall of over 1.81 lakh vehicles over a suspected problem

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