Automotive sector

Automotive industry: Indian automakers have found a way around the global chip crisis

A global semiconductor shortage that is hurting passenger vehicle production is not going to improve anytime soon, even as the market sees an increase in demand for cars and SUVs with the holiday season also around the corner. the street.

Automakers have found a way to run their production lines by reducing the use of microchips in their vehicles.

The higher the variant of a model, the more chips are needed to operate additional features, such as the touchscreen, power mirrors, and the connected car system. The higher variants represent a larger share of market sales and also provide a larger margin for manufacturers. But with some 400,000 customers waiting to get their new cars and the chip shortage in sight, companies are forced to compromise.

Tata Motors, Mahindra & Mahindra and Hyundai Motor India have released variants of their best-selling vehicles without an infotainment system, a key consumer of microchips, or with a simpler system. gives customers a single remote key at the time of purchase and provides the second later, ET learned.

Automakers have also cut production of diesel vehicles and are making more gasoline-powered variants, as diesel engines require relatively more chips, people in the know. Even the share of high-end variants of various models is declining in the market.

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Many customers are also willing to purchase a low-end version of the car of their choice if that meant they could get their new car sooner, car dealerships have said.

“Necessity is the mother of invention,” said Rajan Amba, vice president of sales, marketing and customer service at Tata Motors.

The company launched a variant of its Tiago sedan without a music system. It was not the first choice for the company to sell vehicles without an integrated music system, but the semiconductor situation forced its hand, Amba said.

Hyundai has released new variations of its popular Creta and Venue SUVs, where infotainment systems with touch screens have been replaced by simpler audio players, according to data from automotive business intelligence firm Jato Dynamics. Mahindra did the same for the XUV300.

Mahindra and Hyundai did not comment until press time on Tuesday.

“We are also seeing a shift in the product line in the market towards lower variants. They have less functionality and require fewer sensors,” said Jato Dynamics president Ravi Bhatia.

Automakers are increasing production of gasoline-powered vehicles to get around the chip shortage, he said. “Diesel powertrains generally require more chipsets for engine monitoring, especially for the higher emissions standards that are currently in effect.”

The auto industry is stepping up efforts to ensure sufficient production for the upcoming Navratri-Diwali holiday season, when sales in India increase by up to a quarter more than the monthly average. The wait times for popular car models have extended up to eight months. With factories forced to take vacations due to a shortage of parts, that number is expected to swell further and the wait time is expected to increase by several more weeks.

Some automakers buy chips on the open market, rather than sourcing directly from manufacturers, paying a much higher price.

Mahindra bought chips on the open market for several times the price to produce a handful of units of the XUV700 for launch on August 15. The model is not yet marketed.

In some cases, automakers have resorted to continued production despite a shortage of a part and then installed it in the stockyard or even at dealerships.