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If companies end up manufacturing vehicles according to plan, production is likely to exceed the pre-Covid volumes of Q4FY20

Mumbai, NFAPost: Passenger vehicle makers are looking to ramp up production by an average 18-20% in the March quarter compared to the December quarter as the shortage of semiconductor eases. If the companies end up manufacturing vehicles according to plan, it’s likely to even exceed the pre-Covid volumes of Q4FY20, according to analyst and supplier estimates.

“They all are going full throttle. But production will still not be optimal and fall short by 10-15%,” said a top official at a component manufacturer that counts all the key passenger vehicle makers as its customers.

Car market leader, Maruti Suzuki India plans to produce close to 490,000 units of passenger vehicles in the three months to March as compared to the 432,368 units it produced in the December quarter.

“The electronics supply situation is improving gradually. The company hopes to increase production in Q4 of this financial year. The volumes will be higher than those of Q3 but short of full capacity,” said Rahul Bharti, executive director, corporate affairs, Maruti Suzuki India.

Tata Motors, the third largest in the pecking order, is likely to crank out over 120,000 units in the March quarter as compared to the over 99,000 units it produced in the December quarter, said a person aware of the company’s plans. “It may even exceed the pre-Covid volumes,” the person said. A query sent to Tata Motors remained unanswered till the time of publication of this story.

Hyundai, the second largest auto manufacturer by volume, however, continues to struggle with regards to semiconductor sourcing and may not be able to accelerate the production much. This may work in Tata Motors’ favour and help it bridge the volume gap with the Korean carmaker. A Hyundai spokesperson wasn’t available for comment.

“Going by the recent launches and production plans, we expect the fourth quarter production volumes at the passenger vehicles makers to be higher by at least 20% from the third quarter,” said Puneet Gupta, director, IHS Markit—a sales forecast and market research firm.

The production volumes in all likelihood will surpass the pre-Covid levels but the chip shortage will continue to haunt the firms for another three to four quarters, he said.

Despite a robust demand that comes on the back of a strong preference for personal mobility, PV sales in India have remained in a slow lane owing to a global shortage of semiconductors. PV sales in India dropped to 761,000 units in the December quarter as compared to 898,000 units in year ago period—the lowest in five years, according to Society of Indian Automobile Manufacturers (Siam)

Meanwhile, Kia Motors, the fourth-largest passenger vehicle maker, also plans to go full throttle in the next three months. The company plans to add a third shift at its factory and enhance the overall output by a third, it said earlier this week on the sidelines of Carens’ launch. From the average of around 16000 units a month, it plans to increase production by around 20 per cent, said a person aware of the company’s plans.

Officials at most companies agree that while the availability of the chips has improved, the shortage is far from over and may well continue till the second half of FY23. For now, they have learnt to work their way around it.

Mahindra and Mahindra for instance, has taken various measures to address the challenge, Veejay Nakra, CEO automotive division at the firm said in a post-earnings press conference. It has identified a new IC (integrated circuit or chip) source so that it’s able to create fungibility across its products and has already started benefitting from it. It’s also sourcing ICs from the open market, to help it create good reserve stocks.

In the medium term, it has also taken some steps on the product development front and is working towards removing complexities of multiple function ICs on the ECUs, said Nakra.

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