Maruti, Mahindra car sales slip, Honda an outlier but chip shortage a worry

In the first half of 2020, when the entire country went into a nationwide lockdown, automobile sales slumped to nearly zero as dealerships shut down and even factories had to stall or cut back on production. 

Once the lockdowns lifted, it looked like India’s automobile industry will be able to bounce back as economic activity started picking up again. 

While that did happen, during the second half of 2020 and during the first half of this year, latest data show that vehicle sales in August again took a beating as a worsening global chip shortage has forced automobile manufacturers to cut production. 

Maruti cuts production

Factory output numbers released Wednesday show that Maruti Suzuki India, the country’s largest carmaker, reported a 19 per cent decline in total sales at 130,699 units in August, as against 162,462 units in the previous month. 

The Business Standard newspaper said in a report that Maruti has announced an up to 60 per cent cut in production this month after Bosch – one of its largest chip suppliers – shutdown its factory in Malaysia owing to the pandemic.

Mahindra, Bajaj Auto

But the Gurgaon-headquartered Maruti is not the only carmaker that has had to take a steep production cut. Data put together by Business Standard shows that Mahindra & Mahindra and Bajaj Auto reported a drop of more than 23% and 8%, respectively, in August sales compared with July. Toyota reported a fall of about 2%. 

Honda, Hero, Tata sales rise

To be sure, not all companies have had to go in for production cuts, at least not yet. 

Figures show that Honda’s car and two-wheeler sales rose in August. In particular, Honda’s car sales jumped 84% to 11,177 units in August from 6,055 units in July.

Hero Motocorp and Tata Motors also saw their sales rise in August. Tata Motors sold 28,018 vehicles in August, up 51%from a year earlier but down 7% from July.

Chip shortage

Citing auto dealers, the Business Standard report said that the semiconductor shortage, owing to coronavirus-induced lockdowns in countries like Malaysia, could result in sales dropping by about 30% during the upcoming festival season. Generally, the festival season accounts for a third of the yearly sales for most dealerships. 

The semiconductor shortage could mean that dealerships would be considering a maximum of 30-day inventory during the Diwali-Navratri season this time, as against the usual 45-60 days.

The Society of Indian Automobile Manufacturers, the industry lobby group, has asked the foreign ministry to intervene so as to ensure that when semiconductor plants do reopen, Indian manufacturers are prioritised.