Chip shortage continues to dent auto sales

New Delhi: India Ratings and Research (Ind-Ra) on Tuesday revised downwards the domestic passenger vehicle growth estimates to 15-18 per cent this fiscal, citing semiconductor shortage that could extend to 2022.

Ind-Ra, which had earlier forecast an 18-22 per cent growth for the Indian PV market, said further downside risk remains for the segment. "Any normalisation in production remains contingent on a softening of demand from various end-consumers of chips and an increase in chip production globally," the rating agency said in a statement. While certain Indian PV manufacturers have indicated an improvement in production during October 2021 over August and September, the continuing surge in chip demand globally and time lag to set up new capacities could keep the supply limited, it added.

Normalisation can only be envisaged to happen by the end of the second half of 2022, the agency said. Based on its discussions with industry peers, Ind-Ra said the chip shortages could extend to 2022 and the situation remains highly uncertain. "Given the time lag and the challenges of expanding chip capacity, the shortages could worsen and the situation may not normalise before 2H 22 (second half 2022). "In fact, we may experience an oversupply post the planned chip manufacturing capacities come onstream in 2023 and 2024 coupled with the demand normalisation in the personal computer/laptop segment," it added.