Chip dearth haunting carmakers on delivery deadline

Bengaluru: Carmakers struggle to deliver cars in time to customers as chip scarcity issue worsens in recent months. This is likely to hit the sales of cars during the upcoming festive period. Due to supply issues faced by carmakers, many companies are also reducing their manufacturing capacities.

In an exchange filing, Maruti, India's top carmaker, said its factory output in October could be reduced by 40 per cent. The company cut production by 60 per cent last month.

"Owing to a supply constraint of electronic components due to the chip shortage situation, the company is expecting an adverse impact on vehicle production in October," the carmaker said in an exchange filing. In September, Maruti's domestic passenger vehicles output was at 63,111 units as compared to 1.5 lakh units during the same period last year.

All major car manufacturers including Mahindra, Honda, Hyundai, Tata Motors and others are also facing chip shortage and have indicated that output disruption will lead to delayed delivery of cars this fiscal year.

The shortage of chips is affecting delivery of various consumer good and electronics industries including automobile, cellular phones, smart watches, high-end consumer durables articles among others.

This shortage is likely to persist till the first half of the next year, more chip production capacity gets operational across the world.

Due to the pandemic, there was a huge surge in demand for chips as computers, cell phones and other such devices saw a demand spike. This spike led to excessive demand for chips, in which supply couldn't keep pace with demand.

Globally, most automotive firms, mobile phone manufacturing companies and many other user industries are delaying product delivery and new launches amidst such supply constraints.

To bridge this gap, many countries are ramping up chip manufacturing capacity with the United States leading the way.