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Auto sector posts robust sales amid fears of Ukraine crisis worsening chips shortage

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New Delhi [India], March 1 (ANI): As India’s automobile industry displayed robust sales figures broadly for the month of February in the results declared on Tuesday demonstrating some recovery from the difficulties triggered by semi-conductor shortages, fresh concerns have arisen over the Russian-Ukraine conflict which may worsen the global chip shortage.

Both Ukraine and Russia play a key role in the global semiconductor supply chain. Russia is probably the largest producer and key supplier of rare metals like palladium which is essential for memory and sensor chips along with several other rare-earth metals, explains Hemal Thakkar, Director, CRISIL Research.

Ukraine, on the other hand, is a leading producer and exporter of Neon gas that is used for several processes in the manufacturing of semiconductors like etching circuit designs into silicon wafers to create chips.

The automotive industry, according to Thakkar, has a large dependence on semiconductors as a key component largely in the passenger vehicles and pick-ups segment.

“While there are several consumer durables items, including consumer electronics, which rely on chips — also known as semiconductors — the last 12 months have seen huge shortages in auto-grade semiconductors due to COVID related supply chain issues,” Thakkar told ANI.

As per the preliminary assessment, as pointed out by Thakkar, Ukraine supplies a large part of the US’s semiconductor-grade neon gas which is integral in the chip-making process while Russia supplies about a third of the US’s palladium supply, a rare metal that can be used to create semiconductors.

China would be the next largest supplier for neon gas, and with so much geopolitical tension, there are supply concerns.

“If the geopolitical tensions continue for long, they could have probable ramifications on the semiconductors industry which was already struggling to find ground,” Thakkar said.

The apprehension also finds resonance in a Moody’s Analytics report which notes that the crisis has the potential to extend the stress in the supply chain of semiconductors which are key to manufacturing autos and other electronic equipment in the Asia-Pacific region.

The report titled, ‘Limited Trade Between Ukraine and APAC’ highlights that Ukrainian companies like Cryoin are a major part of the semiconductor supply chain, producing speciality gases like neon, helium, xenon, krypton and their isotopes which are then used by the powerful lasers that semiconductor fab units use to etch the microfine engravings in the silicon wafers.

Indian automakers which posted encouraging sales data for the month of February 2022 riding on a demand surge, are cautiously optimistic that as they enter into the new fiscal, the semi-conductor availability will improve and they will be able to cater to the customer demand in full measure.

Suzuki Motorcycle India registered overall 72,200 unit sales in February 2022, selling 58,603 units in the domestic market and exporting 13,597 units.

Satoshi Uchida, Managing Director pointed out that despite the ongoing semiconductor availability constraints, the company continued to keep growth momentum in February. “We are experiencing a strong demand both from the domestic and the export market,” he said.

Mahindra Auto too clocked overall volumes for the month at 54,455 units, registering a growth of 89 per cent and its highest-ever SUVs volume in February 2022 with the sale of 27551 vehicles.

The passenger vehicles segment (which includes utility vehicles, cars and vans) saw 27,663 vehicles sold in February 2022. Exports for the month were at 2,814 vehicles. In the commercial vehicles segment, Mahindra sold 20,166 vehicles in February 2022 with a growth of 119 per cent.

Veejay Nakra, Chief Executive Officer, Automotive Division, M and M said he expects demand to continue to remain strong as the COVID-19 situation eases further. “We continue to closely monitor the semi-conductor related parts supply and take corrective action as appropriate,” said Nakra.

The crisis of semi-conductor shortage looms over the industry was evident in the monthly figures of Hyundai Motor India which reported a 14 per cent decline in total sales at 53,159 units in February. The company had sold 61,800 units in the same month last year.

“Domestic sales were down 14.6 per cent to 44,050 units last month as against 51,600 units in February 2021. Exports declined by 10.7 per cent to 9,109 units last month as compared to 10,200 units in the year-ago period,” the auto major said.

“As the industry continues to grapple with the semiconductor shortage situation, the company along with its partners is continuously exploring alternatives to ensure customers can take delivery of their most loved Hyundai cars at the earliest,” it added.

Similarly, TVS Motor Company registered sales of 2,81,714 units in February 2022 as against sales of 2,97,747 units in the month of February 2021. Total two-wheelers registered sales of 2,67,625 units in February 2022 as against sales of 2,84,581 units in February 2021. Domestic two-wheeler registered sales of 1,73,198 units in February 2022 as against sales of 1,95,145 units in February 2021.

“The shortage in supply of semiconductors has impacted the production and sales of premium two-wheelers. We are cautiously optimistic that the supply of semiconductors will improve in the coming months,” the company said.

The country’s largest carmaker, Maruti Suzuki reported a marginal drop in total wholesales at 1,64,056 units in February 2022, which includes domestic sales of 1,37,607 units, sales to other OEM of 2,428 units and its highest ever monthly exports of 24,021 units. The company had sold 1,64,469 units in February 2021.

According to Maruti Suzuki, the shortage of electronic components had a minor impact on the production of vehicles that are primarily sold in the domestic market. “The company took all possible measures to minimise the impact,” MSI said.

Tata Motors registered total sales of 77,733 in the domestic and international market for February 2022, compared to 61,258 units during February 2021, showing a growth of 27 per cent over last year.

Toyota Kirloskar Motor sold a total of 8,745 units in February 2022, registering a growth of 19 per cent when compared to sales in January 2022, on the back of a good response to the new Camry Hybrid.

Atul Sood, Associate Vice President, Sales and Strategic Marketing of TKM indicated that the overall sentiment in the market continues to remain positive with a steady surge in demand trends. (ANI)

This report is auto-generated from ANI news service. ThePrint holds no responsibility for its content.

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