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Maruti Suzuki will reduce production by 60 per cent in September due to the semiconductor shortage. India's largest passenger four-wheeler manufacturer has announced that the ongoing chip shortage is currently affecting production.
In August 2021, the Suzuki Motor Gujarat (SMG) contract manufacturing facility had announced three non-production days due to the shortage of semiconductors. However, in September, both Haryana and SMG are facing production delays.
Currently, the total vehicle production capacity across both locations could be around 40 per cent of its regular production capacity. When plants operated at peak capacity in June, Maruti manufactured 1,70,719 units.
As a result, at 40 per cent capacity, the company will produce around 68,000 vehicles in September. As 2021 enters the Indian festive season this could be a massive setback for the brand.
The shortage in production will also result in longer waiting periods with some variants and models becoming unavailable for purchase during the festive season.
Speaking about the current scenario, Shashank Srivastava, Senior Executive Director, Maruti Suzuki India Limited, said, "Sales will be hit by a global shortage of chips that have been disrupting production since the Covid-19 pandemic. The shortage of semiconductors will stretch for September. As of now, it looks like supply will lag behind demand."
Currently, Maruti Suzuki could have an inventory of 30 days while the stock of vehicles could last around 20 days. To overcome the shortage of semiconductors and to keep the production going, the company might increase the production of lower variants in the country.
Semiconductors are silicon chips that cater to control and memory functions with a wide range of applications like automobiles, computers and cellphones. As vehicles get modern with connected features, TFT displays, touchscreen infotainments and more, it would need a lot of semiconductors in its production process.
This is the reason the chip shortage is affecting the production of vehicles in India and across the globe, where manufacturers are forced to delay production.
Global Semiconductor Shortage
The problem started when overseas factories making semiconductors were forced to shut down during the pandemic. However, due to people working from their homes, the demand for electronics grew by a substantial margin.
As a result, while the demand increased, the supply decreased for the semiconductor chips. While the processes reached their normalcy, the gap between supply and demand became so large that companies started to suffer from short supply.
Companies manufacturing semiconductors supply their products to a host of companies in the electronics and auto industry. However, the majority of the demand comes from the electronics industry as compared to the automakers.
Adding to the list of woes for automakers, the semiconductor producers prefer electronics manufacturers as their deal size and profit margins are better when compared to the auto industry. As a result, the shortage is prominent for vehicle producers.
Thoughts About Maruti Suzuki's September Production Reducing By 60% Due To Semiconductor Shortage
As mentioned earlier, Maruti Suzuki is India's top carmaker with 8 models listed in the top 10 car sales chart. As a result, the company would require a large number of semiconductors to complete the production of its models.
However, the ongoing chip shortage has resulted in the brand taking a massive hit during the peak sales season in India. Soon, we might see an increase in sales of lower variant Maruti Suzuki cars or the top-spec models being sold without a head unit. For now, the semiconductor shortage will extend to 2022.