Maruti Suzuki hit by chip shortage, vehicle production tumbles by 60%

India’s leading automaker Maruti Suzuki recently stated that a chip shortage would cause a 60% drop in vehicle production in September. The company had predicted a partial production impact in August, but the cut in its Gujrat and Haryana plants for September indicates the problem for Suzuki Ltd.’s flagship arm is increasing.

Presently, overall car production at both locations is projected to be around 40% of the usual output. With a 60% drop in production, the business would build roughly 68,000 automobiles in September, effectively hampering holiday sales.

It is to be noted that due to the chip shortage, many automakers have shifted their focus to high-margin models while raising prices.

The carmaker, which has a higher market value than its parent Suzuki Motor Corp, produces affordable automobiles, including the Alto and Swift, has been compelled to increase prices. It recently announced price hikes across various models and mentioned vehicle costs in the past few years have been impacted by an increase in input costs.

Maruti Suzuki Chairman RC Bhargava stated that the semiconductor crisis was far from resolved and that it was difficult to anticipate what would happen next. Analysts, on the other hand, believe Maruti is better positioned than its competitors to weather the storm.

The experts cited that Maruti employs simpler semiconductors while the supply of complicated ones is limited. The production should return to near-normal levels around October and November.

Competitors Mahindra Ltd. and Tata Motors had previously warned of the impact of increasing commodity prices and the chip shortage worldwide, along with pandemic uncertainties. 

The Indian Automobile Manufacturers Association (SIAM), an industry lobby group, reportedly approached the Ministry of Foreign Affairs and requested Indian automakers be prioritized when the factory reopens.

Meanwhile, other economies, such as the United States, are in talks with Taiwanese and South Korean chipmakers to secure slots for semiconductor supplies.

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https://financialpost.com/pmn/business-pmn/maruti-production-to-halve-in-sept-as-chip-shortage-hits-indias-top-car-maker