Chip shortage may lead to a production loss of 1.75 lakh units or Rs 11000 crore for Maruti Suzuki in FY-23
Maruti Suzuki, India’s largest car maker continues to face disruption in supplies of semiconductor chips and it has guided for higher impact in the month of March than what it encountered in the month of February.
According to several people in the know, Maruti Suzuki’s production in the month of March is likely to be impacted by 25000 to 40000 units. As against the plan of 1.95 lakh units for March, Maruti Suzuki is likely to produce about 1.55 lakh to 1.7 lakh in the best-case scenario.
Autocar Professional learns, Maruti Suzuki would have incurred a production loss of 1.75 lakh to 1.85 lakh units for the entire of FY-23 leading to a foregone revenue of Rs 10000 to Rs 11000 crore in the current financial year. This is an annual production loss of 8-9%. The company had lost about 2.7 lakh units in FY-22 due to the chip shortage in FY-22.
This means the company would have cumulatively lost about 4.5 lakh units in two years (FY-22 and FY-23) and in a way also defines a very large pending booking of 3.78 lakh and lower market share, given the fact that the rivals like Tata Motors and Mahindra & Mahindra who have managed the situation better.
A further disruption would mean, Maruti Suzuki may not be able to attain the 2 million units target for FY-23.
Maruti Suzuki in its statement to stock exchange on Wednesday said, “The shortage of electronic components had a minor impact on the production of vehicles during February 23. It is expected that the shortage of electronic components may have an impact on March 23 production more than that in the recent months. The Company is taking all possible measures to minimize the impact.”
An email sent to Maruti Suzuki did not elicit any response.
The company started Q1 of FY-23 with 51000 units production loss, followed by 35000 units in Q2, 46000 units in Q3 and it is expected to be around 40000 to 50000 units in Q4 – resulting in a cumulative production loss of 1.72 lakh to 1.82 lakh units for whole of FY-23 on account of the shortage.
In the Q3, analyst conference call, a Maruti Suzuki official said, the limited visibility on availability of electronics components is a challenge in planning the production.
“The electronics component shortages are still limiting our production volumes. Our supply chain, engineering, production and sales teams are working towards maximizing the production volume from available semi-conductors. The supply situation of electronic components continues to remain unpredictable,” said the official.
Citing the helplessness of the situation, which has impacted every car maker in the world, the senior company executive told analysts in January, “That’s a lot of dynamism and uncertainty in this, it’s quite random and we are takers in this market, can’t do much about it.”
Maruti Suzuki on its part is making a lot of efforts on its part in reducing the requirement of semiconductors to the bare minimum and commonising across platforms.
“We use a higher specification, the highest common work. So, there we are going variant wise and reducing the semiconductor requirements so that the same number of semiconductors can service more cars. So, all those kinds of efforts, de-population, value engineering et cetera we are doing from our end, of course we are trying to get maximum from the market and our suppliers,” added the executive on the initiatives taken by the company so far to address the challenges of shortage of parts.