How a global semiconductor shortage is impacting Indian car makers

Source: The Hindu Business Line, Feb 18, 2021

Mumbai: Just as car makers were heaving a sigh with demand starting to pick up, a global shortage in semiconductors has spelled trouble for them — exerting pressure on production, apart from creating supply constraints and long waiting periods. Experts say that the challenges are likely to continue up until the first quarter of FY22.

An unprecedented surge in demand for electronics and personal computers amid the pandemic has resulted in a shortage of semiconductors, and this is likely to persist for a while as demand continues to remain high. Semiconductors are used in the electronic control units (ECU) of cars, especially premium passenger cars. Indian auto manufacturers import electronics and related systems worth nearly ₹30,000 crore, according to EY India.

“The big concern for the auto industry and Mahindra, and in fact for the world, is the semiconductor shortage. (It is) something that we’re very perplexed with, and something where the end is not clearly known as to when this fall will go away,” Pawan Goenka, MD and CEO of Mahindra & Mahindra, said during a press conference on the company’s Q3 results, on February 5.

This is while the demand for automobiles remains buoyant, with no sign of it slowing down, he had said. The semiconductor shortage is expected to be normalised only by June-July, Rajesh Jejurikar, Executive Director – Automotive & Farm Equipment Sector, M&M, had said then.

All major players in the passenger vehicle industry are witnessing pressure on production volume amid supply constraints due to this shortage, said Ashish Modani, Vice-President, ICRA Limited. Because of inadequate supplies and strong automotive demand, the waiting period has crossed six months for certain models/variants, he added.

Car companies had already undertaken a price hike in January due to the rise in input costs, and a further price hike would remain a key monitorable depending on the supply scenario of semiconductors, said Hetal Gandhi, Director, CRISIL Research.

“We have some impact due to short supply of semiconductor-related parts from this month onwards and therefore production adjustments are being done as much as possible so that we can reduce its impact on our customers and overall business,” said Rajesh Goel, Sr. Vice-President and Director, Honda Cars India Ltd. The company is engaging with its suppliers to take quick countermeasures, he added.

“Some Covid-19 related challenges in the supply chain, including a global shortage of automotive embedded electronics, continue to impact the industry. Tata Motors is taking appropriate measures with all of its affected suppliers to mitigate the impact to production.

These global industry challenges are likely to continue in FY22,” the company’s spokesperson said.

During Tata Motors’ press conference on its Q3 results on January 29, PB Balaji, CFO, Tata Motors, said that up until January, there has been no impact on the company due to the shortage of semiconductors. “Having said that, the risks are real and conversations are happening with all tier-1 and tier-2 suppliers and with the semiconductors industry as well to ensure that supplies continue…From a demand perspective, we are going very fast, and that’s also adding to the pressure that we have. This is something that is being managed on a live basis, and we will ensure that we do our best to minimise the impact.”

“This is a challenge, and you need a hell of a lot of firefighting to get through,” Balaji added.

Based on current conditions, the chip supply situation will remain tense during the first half of the year, according to ŠKODA Auto Volkswagen India Pvt Ltd.

“Demand forecasting and production planning become crucial for OEMs in current time, and the primary focus is on fast selling model/variants/colour to protect market share and maximise profitability,” said Modani.

The current semiconductor shortage will certainly revive with time, however, other similar disruptions may occur again, cautioned Yugesh Aglawe, Partner – Supply Chain, Business Consulting, EY India. “Automobile manufacturers should make use of rapid what-if scenario modelling capabilities that are available in modern day Intelligent digital planning solutions to assess such risks in advance. The ones who do this will mitigate their risks better and win more often in the market.” The extent of impact of the shortage of semiconductors depends on PV OEM’s product portfolio as well as supply chain robustness, noted Gandhi. “In this scenario, the microprocessor chip companies have decided to raise prices of semiconductors, and at the same time, undertake capital expenditure so as to set up capacities – expected to become operational from June-September 2021.”

Hyundai to invest $200 mn to build localised EVs for mass market in India

Source: Business Standard, Feb 17, 2021

New Delhi: South Korean auto major will invest a major share of its investment to strategise and produce an affordable electric vehicle for the Indian market.

The company is in talks with battery makers and suppliers to localise a large portion of manufacturing in order to bring the cost down and has earmarked $200 million investment for the purpose.

“We have the product and the technology, and we are reviewing the Indian market condition and the infrastructure situation here. We will come up with some options, which will be the best for the Indian market. It’s a No.1 priority in our future strategy,” Hyundai India’s managing director S S Kim said.

The carmaker’s understanding comes from its experience with its electric SUV Kona, which was launched in 2019. “We had launched the Kona but we understand that it was for the super-premium buyer. To have meaningful volume, we need to be present in the mass segment and we are working towards that,” said Tarun Garg, director, marketing and sales at Hyundai India. Garg refused to give a timeline for the launch.

Garg said that Hyundai in India intends to present itself as a solution to mobility rather than a company which only sells cars. The carmaker, which has completed 25 years in the country, has invested over $4 billion in the Indian market and has clocked over nine million vehicle sales since its arrival. It has a sales network of 1,154 dealerships and 1,298 after-sales workshops across the country.

Tata Motors’ UK based subsidiary JLR announced this week that all Jaguar cars and six out of every 10 Land Rover models will go electric by 2030. The company will invest about 2.5 billion pounds ($3.5 billion) a year into electrification and related technologies.

The company’s parent firm Hyundai Motors and its affiliate Kia Motors announced in 2019 they would invest $35 billion into future mobility technologies including EVs and self-driving cars. They unveiled a new platform dedicated to manufacturing EVs last year and plan to launch 23 EV models by 2025. Credit Suisse expects battery EVs to make up 11 per cent of Hyundai’s sales in 2025, up from 3 per cent last year. The company also is one of the biggest investors in hydrogen fuel cells. The car maker bought a majority stake last month in Boston Dynamics, the company famous for making dancing robots.

Passenger vehicle sales in January grow 11% YoY to 2,76,554 units

New Delhi: During January, the passenger car sales declined by a little more than one per cent year-on-year (YoY) to 1,53,244 units in the domestic market compared with 1,55,046 units in the corresponding month last year.

However, utility vehicle sales grew by 37 per cent YoY to 1,11,494 units during the month as against 81,231 units in January 2020, the monthly report by Society of Indian Automobile Manufacturers (SIAM) said on Thursday.

This has helped the total passenger vehicle sales grew at 2,76,554 units last month, a growth of 11 per cent compared with 2,48,840 units in the corresponding month last year.

Two-wheeler segment

In the two-wheeler segment, the scooter sales grew by nine per cent YoY to 4,54,315 units during the month as compared with 4,16,567 units in January 2020.

The motorcycle sales grew by five per cent to 9,16,365 units in January as against 8,71,886 units in the corresponding month last year, the SIAM data said.

Overall, the two-wheeler sales grew by around seven per cent to 14,29,928 units during the month as compared with 13,41,005 units in January last year.

The total of all segments grew by five per cent to 17,32,817 units in January compared with 16,50,812 units in January 2020.

“In the month of January, 2.77 lakh passenger vehicles were sold, clocking a CAGR growth of just 1.61 per cent over the previous highest sales in January 2018 of 2.64 lakh. As far as two-wheelers are concerned 14.30 lakh units were sold in January, which results in a de-growth of (-) 5.32 per cent CAGR from the highest sales in January 2018 of 16.85 lakh,” Rajesh Menon, Director General, SIAM said.

Sales of three-wheelers continued to suffer a de-growth of (-) 57 per cent to 26,335 units compared to January 2020 (60,903 units), primarily on account of lower off-take of passenger three-wheelers, he said. “Supply chain challenges including the rising price of steel, unavailability of semiconductors and higher container charges, continue to be obstacles in the smooth functioning of the industry,” Menon added.

Skoda Auto Volkswagen India’s operations become net water positive

Source: The Economic Times, Feb 09, 2021

Mumbai: Skoda Auto Volkswagen India, the domestic unit of the VW Group, has achieved certification for being net water positive from DQS India achieving a water conservation ratio of 1.05, meaning it replenishes 105 litres of water for every 100 litres it uses.

Both of the company’s plants in India at Pune and Aurangabad are zero liquid discharge facilities boast effluent treatment and recycling facilities along with sewage treatment plants, the company said in a statement.

This was complemented by several watershed management projects in Latur, Nippad and Gulani villages conserving over 220,000 cubic metres of water annually. The company aims to increase its net water conservation from 1:1.05 to 1:3 by 2025.

“As we grow our operation, we aspire to remain the flagbearer of sustainable operations and continue to demonstrate the economic viability of fulfilling our responsibility to replenish much more than the impact of our operations to the environment,” Gurpratap Boparai, managing director, Skoda Auto Volkswagen India, said in a statement.

Last year, the VW Group company was received ‘Zero Waste to Landfill’ certification from TUV Nord.

Daimler India expands product portfolio, launches 8 new models

Source: Business Standard, Jan 27, 2021

New Delhi: Daimler India Commercial Vehicles (DICV) on Wednesday launched eight new products, including fully built reefer trucks which are customised for pharma and vaccine logistics.

The Chennai-based company has introduced six trucks and two bus models equipped with new user-centric features and design elements under its Bharat Benz brand.

The product portfolio comes with COVID-19 prevention features like infection-proof fabric seats, safety kits and disinfection fogging machines.

In today’s rapidly-changing environment, it is vital to meet the dynamic needs of society.

With this in mind, we proudly introduce a new range with special COVID-prevention features,” DICV MD & CEO Satyakam Arya said in a statement.

Since the start of BS-VI sales in April 2020, Bharat Benz has almost doubled its market share and increased its network to 250 touchpoints across India.

Automobile sales register 14 per cent growth in December

Source: The Hindu Business Line, Jan 14, 2021

New Delhi: In December, the domestic passenger car sales grew by more than eight per cent year-on-year (YoY) to 1,46,864 units compared with 1,35,531 units in December 2019.

The utility vehicle sales also grew by around 20 per cent YoY to 94,787 units during the month as against 79,153 units in corresponding month previous year, the latest report shared by Society of Indian Automobile Manufacturers (SIAM) said on Thursday.

This has led to the overall growth of around 14 per cent in the passenger vehicle segment to 2,52,998 units during the month as compared with 2,22,728 units in December 2019.

In the two-wheeler segment, the sales grew by a little more than seven per cent YoY to 11,27,917 units in December as compared with 10,50,038 units in December 2019.

The motorcycle sales grew by around seven per cent to 7,44,237 units during the month as compared with 6,97,819 units in the corresponding month previous year.

Similarly, scooter sales grew by around six per cent YoY to 3,23,696 units compared with 3,06,550 units in December 2019.

“Indian automobile industry appreciates the government’s efforts to balance the safety of people and the revival of the economy from the negative effects of the pandemic. Initiatives such as the announcement of PLI scheme, keeping interest rates very low, targeted spending in rural areas and continued focus on building road infrastructure, will help in our recovery process,” Kenichi Ayukawa, President, SIAM said.

He also said that the market situation is dynamic and uncertain. The industry is facing a shortage of semiconductors, steel and shipping containers.

“There is also an impact of the price increase of steel, logistics and other raw materials. The industry is working hard to get back to better volumes and better business health while ensuring the safety and well-being of people across the whole value chain,” he added.

Car wholesales

Meanwhile, SIAM also reported wholesale numbers of the last nine months (April-December), in which it had reported a decline of 16 per cent in total passenger vehicle sales to 1,777,874 units as compared to 2,117,920 units in corresponding period previous year.

Hit by the lockdown and no sales for more than a month during the pandemic, the passenger car wholesales declined by more than 20 per cent YoY to 1,028,101 units during April-December 2020, as compared with 1,291,234 units in same period in 2019.

Two-wheeler sales also had declined by around 23 per cent YoY during the period to 1,07,65,788 units during the period, as compared with 1,39,13,795 units in corresponding period previous year.

The commercial sales were also hit the most and declined by more than 37 per cent YoY during the April-December period to 3,58,203 units as compared with 5,70,694 units in the same period 2019. “If we look at the cumulative numbers of the nine-month period from April to December 2020, it shows that sales of all segments are still behind by many years. Passenger vehicle sales are behind by nearly a decade, while two-wheeler sales are behind by seven years,” Ayukawa added.

Tesla marks India entry with new office in Bengaluru, names three directors

Source: Business Standard, Jan 13, 2021

Bengaluru: US-based electric vehicle maker Tesla has registered with the Registrar of Companies in India as Tesla India Motors and Energy Private Ltd.

It incorporated itself in Bengaluru on January 8 with an authorised capital of Rs 15 lakh and a paid-up capital of Rs 1 lakh.

“Tesla setting up its office in the state is a welcome step.

“We will cooperate with it and give it all the facilities to function smoothly,” said Karnataka Industries Minister Jagadish Shettar.

No location has yet been finalised for Tesla to set a manufacturing plant in the state, he added. Gaurav Gupta, principal secretary to the government of Karnataka, said the state had been in regular touch with Tesla for the last few months.

Vaibhav Taneja, Venkat­rangam Sreeram, and David Jon Feinstein will be the three directors of the new company.

Union Minister for Road Transport and Highways Nitin Gadkari had in December said that Tesla would be arriving in India in early 2021. Tesla CEO Elon Musk too had last year announced on Twitter that his company would enter India in 2021. The world’s most valuable auto company is likely to make its debut in India with the more affordable Tesla Model 3. Expected to cost around Rs 60 lakh, the fully electric vehicle is powered by a 60kw hour lithium-ion battery pack with a range of 500 km. The sedan has a top speed of around 250 km and goes from 0 to 60mph in only 3.1 seconds.

To begin with, Tesla will take an imported route for its initial innings and therefore attract high duties. It will also not be eligible for the FAME scheme. Karnataka is currently a hub of several EV makers such as Ather Energy and Mahindra Electric. In December, electric mobility solutions and services company SUN Mobility had also announced plans to roll out 100 battery swapping stations in Bengaluru by the end of 2021.

Fiat Chrysler to invest $250 mn in India

Source: LiveMint.com, Jan 06, 2021

FCA India Automobiles Pvt. Ltd will invest over $250 million to assemble and manufacture four new sport-utility vehicles (SUVs) in India, the local arm of Italian-American carmaker Fiat Chrysler Automobiles said on Tuesday.

“FCA today announced an expansion to the local product lineup in India, confirming that an investment of over $250 million has been committed towards the production of four new Jeep SUVs,” the company said.

The SUVs, which will be launched in 2021-22, include Jeep Compass and a three-row Jeep SUV, which the company said is an all-new vehicle in its global portfolio.

Production for the updated Bharat Stage (BS)-VI variant of the Jeep Compass, which is scheduled to be launched later this week, has already started, the company said. The three-row, seven-seater, midsize Jeep SUV, which is codenamed H6, is planned for a commercial launch in 2022, FCA group added.

FCA also plans to locally assemble its iconic Jeep Wrangler and the next-generation Grand Cherokee. The two vehicles will be assembled at the FCA’s joint venture manufacturing facility at Ranjangaon near Pune.

The four new products will hit Indian roads by end-2022.

“The new investment ($250 million) is in addition to the $450 million we have already committed to our Indian operations over the past five years,” said Partha Datta, managing director, FCA India, adding that it would give the company competitive advantage in the premium SUV segments.

Currently, Jeep Compass, which competes with Tata Harrier, Mahindra XUV500, Hyundai Tucson and MG Hector, among others, is the only locally-produced SUV sold by the company.

The Ranjangaon unit, one of its five global manufacturing facilities, has produced over 70,000 units since its launch in 2017, including the 50,000 units of Compass sold in India, besides another 20,000-plus units for exports.

It also imports and sells Jeep Wrangler as a completely built unit (CBU) but the company said it has already sold all of its CBU stock last year.

Last month, the FCA group announced it was setting up a global technology centre—Information and Communication Technology Center or FCA ICT—in Hyderabad at an investment of $150 million.

The new unit is one of FCA’s largest innovation and technology development centres, with the company aiming to tap India’s vast talent pool of software engineers and create up to 1,000 new jobs by end-2021. “We are determined to increase locally-made componentry in our vehicles which are produced in our joint venture manufacturing facility. Our plans in India are aimed at increasing the value proposition for customers through our products and services, working hard on customer satisfaction and unlocking business opportunities for our business partners,” Datta said.

2021 may be a bumpy ride for medium and heavy vehicles

Source: LiveMint.com, Jan 05, 2021

Complete recovery for the medium and heavy commercial vehicle (MHCV) segment remains uncertain in 2021-22, despite sequential growth in demand, three industry executives told Mint.

Key parameters such as excess load-carrying capacity following the revised axle load norms, low production and fleet capacity utilization, and a surge in price because of the implementation of the Bharat Stage VI emission norms, besides increasing defaults and stressed financials of medium and small fleet operators, are going to be major challenges during the year.

Leading commercial vehicle (CV) manufacturers such as Tata Motors Ltd, Ashok Leyland Ltd, and Daimler India Commercial Vehicles Pvt. Ltd recorded year-on-year growth in MHCV wholesale volumes in December.

“While the CV manufacturers have been posting year-on-year growth in MHCV volumes, it is not a correct indicator of recovery as companies begun cutting down the production of BS IV-compliant trucks from Q2 of the last fiscal. The capacity utilization across plants remains lower than 50% even after the mild recovery seen during festive season,” said a senior executive, requesting anonymity.

Recovery in the MHCV segment must be compared with FY19, when the segment recorded its all-time high volumes, said the executive. Demand in the CV segment, also a barometer of increasing economic activity, had picked up from Q2FY20, after the lockdown was eased across the country, primarily on the back of rising consumption of essential items and production activities across key sectors including fast-moving consumer goods (FMCG), auto, steel, and cement. An improvement in construction activity also contributed to the demand for tipper trucks.

“Though fleet utilization levels have improved sequentially from the lockdown lows with improvement seen during the festive months of October and November, the freight rates continue to remain just about at the levels of FY19 as against the fuel prices, which are about 8% higher than FY19. This reiterates that fleet utilization remains lower than FY19 levels. We, therefore, believe that fleet operators’ uncertainty may continue to impact CV recovery in the medium term,” Hetal Gandhi, director, Crisil Research, said.

The financials of fleet operators are now more stressed than before, even as fleet utilization levels are at 70-80%, on a par with pre-covid levels, as cost and liabilities have gone up substantially while margins are down after businesses resumed after the lockdown, Bombay Goods Transport Association spokesperson Abhishek Gupta said.

“While we have seen fleet utilization rates grow from 20% to 70% after the lockdown, the business is still on the lower side and does not justify fleet operators investing in new, more expensive BS VI trucks. There is no clear path to revival for the fleet operators,” Gupta said.

There are an increasing number of defaults across small fleet operators with less than five trucks, as there is not enough business to pay for five-six months of EMIs, Gupta said. “We are sure this default number will drastically increase unless there is some relief that comes along (from the government),” he said. However, a Daimler India spokesperson said: “We expect a sharp rebound from 2021, mainly driven by economic recovery. Goods and services tax collections in December being at a record high seem to clearly indicate a sharp recovery across sectors.”

Sonalika Tractors launches country’s first field-ready electric tractor ‘Tiger’

Source: Economic time, Dec 23, 2020

MUMBAI: Sonalika Tractors on Wednesday launched the country’s first field-ready electric tractor ‘Tiger,’ powered by a 25.5 kW natural cooling compact battery, which gives much lower running costs compared to a diesel tractor, priced at Rs 5.99 lakh (ex-showroom). The company also opened bookings for its maiden e-tractor.

Equipped with the Sonalika transmission, the field ready e-tractor offers a top speed of 24.93 kmph and a battery backup of eight hours while operating with a two-tonne trolley. As an option, the company is also offering a fast charging system with which it could be charged in just four hours.

“Our promise to every Indian farmer to constantly provide technological evolutions to enhance farm productivity and profitability comes packaged with Tiger Electric, where we have bridged the gap between concept and being field-ready, while keeping pace with global benchmarks in farm mechanisation technology,” said Raman Mittal, Executive Director, Sonalika Group at the launch.

Designed in Europe, Tiger Electric is manufactured at Sonalika’s integrated tractor manufacturing facility at Hoshiarpur (Punjab), the company said.

“Tiger Electric is built on the proven tractor platform of Sonalika to guarantee farmer friendliness and remain easy to use as we progress towards an emission-free, greener tomorrow. Tiger Electric operation is no different than regular tractors making it farmer-friendly while cutting off the fuel cost,” Mittal said.

Tiger electric has the same global technology which is offered to European and American farmers, he added.

The e-tractor is powered by a state-of-the-art IP67 compliant 25.5 kW natural cooling compact battery to ensure 1/4th running costs against the traditionally used diesel, the company said.

The German designed energy efficient Etrac motor offers high power density and high peak torque with zero RPM drop for optimal performance, it added.

“Sonalika’s field ready Tiger Electric tractor is our commitment to accelerate India’s march towards a greener tomorrow and stay in line with Government of India’s ambitious move of introducing EVs by 2030,” Mittal added.