Chip shortage: Crisil, Ind-Ra cut PV industry growth forecasts
NEW DELHI: Two rating agencies — Crisil Ratings and India Ratings — on Tuesday cut down growth forecasts of India’s passenger vehicle (PV) market amid deepening shortage of semiconductors which has forced India’s largest carmaker Maruti Suzuki and others to significantly reduce their production level in recent months.
While Crisil expects the PV market to grow 11-13% year-on-year in FY22 against the earlier forecast of 14-16%, India Ratings expects growth to moderate at 15-18% y-o-y during FY22 from the previous estimate of 18-22%.
India Ratings, which warned of further downside risk, said that any normalisation in production remains contingent on softening of demand from various end-consumers of chips and an increase in chip production globally.
The two agencies expect this shortage to continue well into the first quarter of next fiscal with capacity addition not keeping pace with demand.
According to India Ratings, given the time lag and the challenges of expanding chip capacity, the shortages could worsen and the situation may not normalise before H2 of 2022.
Crisil said that for manufacturers, the shortage has led to production losses, while for customers, the waiting period for some models has increased from 2-3 months to 6-9 months.
According to Crisil, poor inventory planning by OEMs, chip hoarding by Chinese companies, and natural disasters affecting major chip factories further exacerbated the problem.
Besides, logjams at ports have also affected shipment of chips this fiscal.
“Besides, consumers have also been preferring vehicles with more electronics-driven features, or a higher semiconductor quotient. The upshot of the chip shortage has been PV production cuts, which will have a bearing on the ongoing festive season as well when sales are typically higher. Consequently, we foresee tempered overall growth for PVs,” said Anuj Sethi, Senior Director, CRI SIL Ratings.
According to Mayuresh Korde, Team Leader at Crisil, besides the impact on operating leverage stemming from production losses, higher metal prices could also dent operating profitability of auto firms by 100-150 bps to 6.5-7% this fiscal.
11-13% Crisil sees FY22 PV mrkt growth
15-18 % Ind-Ra projects FY22 growth