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    Automotive Sector may lose $5 billion Revenue this Fiscal Year

    India’s Automotive industry is set to lose 500,000-600,000 units in production and more than $5 billion in revenue this fiscal year due to the global shortage of semiconductors, say, industry executives.

    Since the beginning of the financial year in April, automakers have suffered a production loss of 300,000-350,000 units till the end of October because of the shortage of microchips that are a key component in newage vehicles. The production loss also resulted in an abysmal festive season for the industry.

    While the supply scenario for chips has become better now, with Malaysia resuming supplies as the Covid situation in that country has improved, vehicle makers are still expected to lose 250,000-300,000 units in the second half of this fiscal year 2022, say, industry experts.

    Market leader of Automotive Maruti Suzuki is set to lose about 20% of its annual output, or 310,000 units, this fiscal year, resulting in a revenue loss of $2.2 billion (based on the net realisation of the September 2021 quarter). The rest of the market is set to incur a similar loss in revenue though the volume loss may be marginally lower.

    Suzuki Motor, the Japanese parent of the Indian automotive market leader, has guided investors that it is set to lose 370,000 units outside of Japan, Credit Suisse said in note released on Monday. According to Swiss brokerage, 85% of this volume loss will be for Indian operations.

    Maruti Suzuki had stated that the company had lost 116,000 units in the fiscal second quarter due to the shortage of chips. Going by the global guidance, the impact is going to be almost double at 200,000 units in the second half of fiscal year, even as the November output was expected to be 85% of its normal monthly production.

    Suzuki Motor, in its volume forecast after the second-quarter earnings, has considered a 6% YoY volume decline for Indian operation to compute its volume forecast for automobiles, compared with 11% growth in the previous quarter. Maruti Suzuki had produced 867,000 units between April and October 2021, according to the company’s filings with stock exchanges. Its monthly average production was 109,000 vehicles during the August-October period.

    Parent Suzuki’s volume guidance assumes that the level of production loss in October 2021 would continue for the rest of the year.

    In an emailed response to ET’s questions, a Maruti Suzuki spokesperson said: “We don’t think a limited-period impact of semiconductor shortage, just like Covid-related disruptions, should be of medium/long term consequence to the business or its stakeholders.”

    During the peak festive months of September and October, the car industry output was down 25-40% with production slipping below 200,000 units in September. Though the output improved to 250,000 units in October, it was still way short of the production of 340,000 units a year earlier.

    The industry output was pulled down mainly by the drop in volume at Maruti Suzuki. The maker of the Swift and Dzire operated factories at 40% and 60% capacity in September and October due to the chip shortage, as Malaysia shut its factor.

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