The global shortage of semiconductor chips is hurting automobile production and may impact August-September wholesales, even as demand is recovering well from the second wave of the pandemic, a report said on Tuesday.
In August, the registration of passenger vehicles and tractors saw a 41-44 per cent uptick over the same period of 2019, and truck registrations are also improving despite a 15 per cent decline in the months over August 2019, financial services firm Jefferies said in its report.
However, two-wheeler registrations fell 19 per cent in August over the same period of 2019, it said.
Noting that chip shortages are hurting production and should impact August-September wholesales, Jefferies said, "companies such as Maruti, Bajaj and Royal Enfield have seen an increased impact in the September quarter."
The recent pandemic-related lockdown in Malaysia might add to the constraints, it added.
Semiconductors are silicon chips that cater to control and memory functions in products ranging from automobiles, computers and cell phones to various other electronic items.
The shortage of such a crucial component has been impacting the automotive industry globally along with other industries, forcing them to cut down on production.
The usage of semiconductors in the auto industry has gone up globally in recent times with new models coming with more and more electronic features such as bluetooth connectivity and driver-assist, navigation and hybrid-electric systems.
Passenger vehicle registrations, fell sharply by 29 per cent in the first quarter of this fiscal over the same period of 2019, as the second COVID wave took a big toll, Jefferies said in the report, adding, "demand has recovered well with registrations, when compared to 2019, rising 24 per cent in July and 41 per cent in August."
Online search trends for leading original equipment manufacturers (OEMs) dipped slightly in the second half of July but are recovering again, indicating reviving consumer sentiment, it stated.
Though the two-wheeler demand is also recovering from the sharp 46 per cent fall in registrations in Q1FY22 versus 2019, registrations are still 19 per cent below 2019 in July-August and the segment is lagging in recovery, the report noted.
However, website visits for two-wheeler portals are on a gradually rising trend, suggesting improving consumer sentiment, it said.
Tractors continue to witness strong growth with July-August registrations up 44 per cent over 2019, and truck demand is also recovering sequentially with August registrations just 15 per cent lower compared to 2019, according to the report.
The report said there was no respite from the increase in steel prices with Asian steel prices holding up despite the sharp fall in iron ore, adding that the Indian steel price is at an all-time high of Rs 67.5K/ton (5 per cent above June quarter average).
Spot aluminium price at USD 2,674/ton is also 12 per cent above June quarter average.
"However, we believe bulk of the gross margin pressures should flow through by September quarter and auto OEMs should see sequentially better margins in the second half of the ongoing fiscal, especially as volumes recover," it stated.It also noted that the slowing credit growth has raised concerns on Chinese metal demand although a seasonal pick-up in construction and infra stimulus should provide tailwind while potential production cuts could also tighten supply in the second half of calendar year 2021.