Sales recover in Indian auto market but chip crisis may continue to be a worry

Society of Indian Automobile Manufacturers has warned that the semiconductor shortage will continue to disturb production even as vehicle sales for 2021 made a recovery.

Kenichi Ayukawa, President of the association told Bloomberg that one can expect the shortage to continue as it will take a long time for new investments to take place in the semiconductor sector. Ayukawa added, “For the sustainable growth of the industry, there is a need for both demand improvement and easing of supply chain challenges."

Ayukawa, who is also the Chief Executive Officer of Maruti Suzuki India Ltd, noted that the semiconductor shortage has affected supplies of components such as engine control units and vehicle information systems. Therefore, an increase in the cost of raw materials has pushed automakers to increase product prices. He also added that due to this, entry-level vehicles have become expensive due to the “steep" increase in steel prices, and stricter emission and safety regulations.

Maruti Suzuki announced a price hike on Saturday where it said that the company is increasing the prices of its vehicles by 4.3 per cent with immediate effect. The prices have been increased across the portfolio in the range of 0.1 per cent to 4.3 per cent. The company attributed the hike to reasons such as an increase in the cost of essential commodities example steel, aluminium, copper, plastic and precious metals. Last month, a Reuters report stated that production at automaker's two facilities in Haryana and in Gujarat was to remain affected with production being at 80 per cent to 85 per cent of normal production.

The association also informed that India's total vehicle sales rose by 6 per cent that is to 18.5 million units last year, Bloomberg reported. Sales of passenger cars including cars and SUVs grew by 27 per cent to 3.1 million in 2021. Sales of two-wheelers also saw an increase to 14.5 million last year from 14.3 million in 2020.