New Delhi, Dec 9 (Agency) The Reserve Bank of India has flagged concerns over the nascent recovery in consumer confidence getting hit by a pass-through of input-cost pressures to consumers by the automobile sector as it battles headwinds from a shortage of chips, it was reported on Thursday. RBI Governor Shaktikanta Das noted that supply disruptions such as semiconductor shortages have maintained pressure on producer margins forcing them to pass on the costs to buyers. While this was already happening in the past months, it is likely to continue as domestic demand improves further, Das said.
The RBI Governor’s concern resonates in a wide cross section of the auto industry with many players, while indicating that the worst is behind them, also agree that a smooth demand-supply equilibrium is still months away. This resonates in KPMG’s recent annual global automotive executive survey across automotive and adjacent vulnerable supply chains with industry heads and stakeholders expressing worries about a range of issues affecting the supply chain, including the price and availability of semiconductors, steel, rare earth elements and other scarce materials. Over 50 per cent of respondents were “extremely” or “very worried” about the supply of these materials. Auto car sales till last month continued to skid on the back of paucity of semi conductors. Hyundai Motor India which registered domestic sales of 37,001 units and export of 9,909 units with cumulative sales of 46,910 units for the month of November 2021, said its sales in November have been affected on account of the ongoing semiconductor shortage situation and that the company is making all efforts to mitigate the situation.
According to Veejay Nakra, Chief Executive Officer, Automotive Division, M&M, issues around semi-conductor related parts continue to remain a challenge for the industry. “We are monitoring the situation closely and taking appropriate steps,” he said following the release of the company’s November sales figures. Acknowledging that the industry has been facing a severe supply crunch of semi-conductors in recent months, Rajesh Menon, Director General of SIAM feels that the situation creates a conducive climate for bringing in investments. “Shortage of semiconductors to the Tier 1 and Tier 2 suppliers of OEMs, has affected supplies of engine ecu, keyless entry, abs systems, infotainment systems etc. There is a huge opportunity in India for manufacturers of semiconductors to invest, not only for the captive automotive market, but also for meeting the requirement of other consumer goods and electronics industry,” said Menon. According to Fitch Solutions Country Risk & Industry Research, India presents a favourable environment for manufacturers of electronic components given the existence of incentive schemes to promote local manufacturing. “The Tata Group’s plans to establish an outsourced semiconductor assembly and test facility in India, its first foray into chip-making is timely and opportunistic, coming at a time of global chip shortages,” says the report. “However, a reliance on silicon wafers made by offshore foundries, growing geopolitical tensions in the region and the emergence of new COVID variants all pose considerable downside risks to Tata’s plans,” the research points out.