India’s festive season is just around the corner and the automotive industry experiences a significant rise in demand at this time of year. However, despite an increase in demand for passenger vehicles (PV), supply chain issues remain a concern and could weaken the PV industry.
What is the impact of supply chain issues on the industry?
The Federation of Automobile Dealers Associations of India (FADA) reports that supply chain problems will get worse with the soaring holiday demand. “We are at the cusp of the holiday season which will boost demand”, said Vinkesh Gulati, President of FADA. “Supply chain issues are becoming a major issue in passenger vehicle segments”, added Vinkesh.
Despite the industry having managed to circumvent demand in August and most PV dealers having opening stocks of 30-35 days, Gulati cautioned there are concerns going into the festive season. On average, most popular models are delayed between two and eight months by most manufacturers, but diesel vehicles are particularly affected. Gulati explained that diesel car manufacturers that have a significant presence in the market are most affected, but with time, almost all manufacturers will be affected.
“Passenger cars are moving in large numbers, save for a few models that are not in demand. The semiconductor shortage, which has hit production in August, will make it impossible for us to keep up with the improvement in enquiries or customer demand,” Gulati concluded on a worrying note.
How are carmakers responding to the crisis?
According to Tarun Garg, Director of Marketing, Sales & Service, Hyundai Motor India, the auto brand is a part of the global supply chain and will have to deal with some pressure in the future, but he says “it is working together with its vendors to mitigate the situation”.
Furthermore, Volkswagen India, Brand Director, Ashish Gupta also reported to a credible automobile industry source that the current challenge is keeping the company afloat. He said that in production facilities, the planning schedule is always at least three months in advance, but at present, the company doesn’t have even a week’s planning stability.
Other challenges that automakers face:
Carmakers are also suffering from ever-increasing raw material prices, which in turn has an impact on the cost of vehicles. As a result of the semiconductor crisis, wherein carmakers must purchase chips from alternative vendors at inflated prices in order to meet demand, the customer is forced to bear the brunt.
RC Bhargava, Chairman, MSIL, said recently in an interview, “The Indian automobile industry grew very rapidly from 1993 to 2010 at a double-digit rate and the slowdown has only happened in the last 10 years. The main reason is that acquiring a car has become significantly more expensive for ordinary people during the last decade. A lot of material for manufacturing still has to be imported, so regulations, as well as the devaluation of the Indian Rupee, have affected cost.”