This week in Auto: Auto demand improving but can production keep up?

Source: Reuters

November marked the third consecutive growth month in sales for the passenger vehicle industry with a strong and continued pick-up in demand.

But like we've highlighted earlier, keeping production in line with demand will be the key to moving forward in order to achieve a sustained growth.

More on this later in the copy but first here is the list of all the important events that occurred in the auto sector this week.

Maruti Suzuki became the only carmaker in the top five category to register a drop in sales in November 2020. This came on the back of two consecutive months of robust double-digit growths. Sales of the Alto and Swift maker fell by 2.4 percent during November while the industry grew by 9 percent during the same month.

So was it demand fatigue, fierce competition or a combination of both behind the fall, which has spooked market watchers? None, as per a company official. The real reason behind the fall was due to the record low factory inventory and production shortages.

After a fall in October, sales of cars and SUVs have swung back in the green - registering their best ever numbers for November, following an upbeat demand during the Diwali period.

Retail sales of passenger vehicles (car, SUV and vans) for November stood at 2,91,001 units, as per data shared by the Federation of Automobile Dealers Association (FADA), registering a growth of 4 percent compared to November 2019.

Manufacturer of two and three- wheeler tyres TVS Srichakra announced Rs 1,000 crore capital expenditure plan which include ramping up of capacities at its facilities, the company said on Tuesday.

The investment spread over a three-year period would result in 25-30 percent increase in two and three-wheeler tyre capacity and also doubling of 'off-highway' tyre at its facilities in Madurai and Pant Nagar, respectively.

The members of the family holding shares in various TVS Group companies will rearrange their stakes so as to "align and synchronise" with the management of the respective companies, the patriarch of the group Venu Srinivasan said in a letter.

The communication, which was sent to the BSE as well, mentions that the letter was the fallout of the memorandum of family arrangement executed on December 10 between the members of the TVS family.

Earlier in the week SUV-specialist Mahindra & Mahindra warned that its production could be affected due shortage in global supply of microprocessors used in Electronic Control Unit (ECU) supplied by Bosch.

M&M is assessing the likely production loss for the March quarter which will not affect its tractor and three-wheelers.

Bosch blamed the shortage of the vital component to growing global demand to make machines that look into safety and hygiene against COVID-19. The company also blamed the worldwide process of switchover to 5G technology for the shortage of microprocessors. The company imports components into India before supplying the finished product to its clients.

“Restoration of normalcy in global supply situation for imported components and impacts are being very closely assessed and addressed on top priority”, Bosch India said.

An ECU is like an onboard computer and is considered to be the heart of the engine which ensures optimal performance of a modern-day engine. It controls the fuel supply, air management, fuel injection and ignition and used in gasoline, diesel, CNG, ethanol and also hybrid and fuel cell system.

Bosch is not the only player to make microprocessors. Delphi, Continental and Denso are some of the other big names in this industry. So far none of the other vehicle makers have come out to express concern over the shortage of ECUs.

But the shortage is there and if left unresolved could damage the sales recovery that began a couple of months ago, thanks to the lifting of the lockdown restriction and the festive period that followed. The Automotive Component Manufacturers Association (ACMA), the apex lobby body of the auto component makers said it is monitoring the situation.

Deepak Jain, President ACMA, said, “Any stoppage of vehicle lines has a resonating effect on the entire auto component manufacturing ecosystem. We are continuing to engage with the OEMs and monitoring the situation. The electronic content in vehicles has been progressively increasing and incidents such as these only precipitate the need for localisation and self-reliance in auto electronics in the country.”