NEW DELHI: Owing to the supply constraints in procuring electronic components due to the shortage of semiconductors, India's largest carmaker, Maruti Suzuki, said on Tuesday that its production in September will shrink by as much as 60%.
"The company is expecting an adverse impact on vehicle production in the month of September in both Haryana and its contract manufacturing company, Suzuki Motor Gujarat Pvt. Ltd. (SMG) in Gujarat. Though the situation is quite dynamic, it is currently estimated that the total vehicle production volume across both locations could be around 40% of normal production," the carmaker said in a regulatory filing on Tuesday.
Last week, MSIL chairman RC Bhargava had said that the semiconductor shortage problem is expected to be over by 2022. He had also said that Maruti Suzuki hasn't had a major impact due to it though its production has been hit partly. "The shortage of semiconductors is a temporary problem partly due to COVID-19. Our estimation is that this shortage problem will be over by 2022," Bhargava had said.
A fall in production by Maruti Suzuki will have a big impact on India's cumulative passenger vehicle sales volume as the company sells one in every two cars sold in the domestic market. As for consumers, this means a longer waiting period for popular models such as Baleno, Swift, Dzire, Brezza and more.
Fall in production will also dent MSIL's revenue in the second quarter of FY2022. It comes ahead of the crucial festival season when dealer showrooms fill up their inventory level as sales in festive months are much higher than in regular months.
Earlier in August, MSIL had informed that owing to the semiconductor shortage situation, they have been told by their contract manufacturing company, Suzuki Motor Gujarat Private Limited (SMG), that production will be partially impacted this month.
"SMG will tentatively not carry out production on the three Saturdays (7th, 14th and 21st August). In addition, some of the production lines may see a temporary reduction from 2-shift to 1-shift working. "As the situation is dynamic and uncertain, the company will monitor and take a day-to-day
decision on models, lines, or shifts to optimize resources for maximum efficiency," Maruti had said in a regulatory filing on August 4.
Maruti Suzuki's production facilities in India can roll out around 22.5 lakh units per annum.
Before August, MSIL had been managing production at their facilities without major setbacks even as a fall in semiconductor availability worldwide jolted production at almost all the major car companies. In India PV makers such as Mahindra & Mahindra (M&M), MG Motor and Ford India had to undertake production cuts due to the chip shortage.
Semiconductors are silicon chips that cater to control and memory functions in products ranging from automobiles, computers to cellphones. Following a surge in demand for electronic times during the lockdown period, automakers are struggling to secure their quota for this important component.