Russia-Ukraine war: Chip crisis in Indian auto industry may worsen, says FADA

Indian auto industry may suffer the consequences of Russia’s decision to invade Ukraine as the global automotive supply chain has once again come under strain, conveyed Federation of Automobile Dealers Associations (FADA). The association is concerned that this war will negatively impact its industry outlook for the term. It has changed its vision from neutral to negative till the time the conflict doesn’t come to an end.

As per the near-term outlook report released by the association, Russia is one of the largest producers of rare-earth metals especially Palladium, which is an essential metal for semiconductors while Ukraine is one of the biggest producers and exporters of Neon gas, used in the manufacturing of semiconductors. “Due to the ongoing war, we once again fear the shortage in semiconductors which will create additional supply-side issues for PVs," added the industry body.

The ongoing war between the two countries will bring a new set of challenges for Indian auto retail as it is being expected that shortage in raw materials for making semiconductors will disrupt supplies and crude oil touching the $110 mark may lead to a fall in demand. The body also shared that as crude oil is breaching the $110 mark, the government will not be able to restrict the prices of petroleum products for long. Post state election results, oil marketing companies will increase fuel prices by at least ₹10-15 per litre.

According to February 2022 sales data released by the association, on a year-on-year basis, total vehicle retail for last month fell by 9.21 per cent. It is 20.65 per cent down compared to February 2020, a pre-Covid month. Although demand for passenger vehicles continues to remain strong, the segment is still facing the impact of semiconductor shortage hence affecting the supplies. Infrastructure spending by the government has also increased the demand for heavy commercial vehicles and tippers.

(With inputs from ANI)