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Vehicle production at Maruti Suzuki India, which makes and ships more cars than any other maker on the subcontinent, is likely to fall 40 percent below normal this month because of “a supply constraint of electronic components due to the semiconductor shortage situation,” the company reported in a regulatory filing earlier this month.
Maruti expects the chip shortage to last for a year and will throttle back production to match its supply of semiconductors.
Suzuki Motor Corp., a partner in and supplier to Maruti, has forecast it will be short of chips until at least next April and said it is negotiating long-term contracts with chip-makers to guarantee future supplies.
TREND FORECAST: India’s auto industry was struggling to emerge from its worst-ever depression in the wake of a drastic government lockdown during the first COVID war.
The lack of chips, lasting for months to come, will continue the industry’s high unemployment rate in one of the world’s poorest countries, will push used car prices higher, and drive inflation higher and faster.
More broadly, as we wrote in “Auto Industry Chip Shortage Fallout” (24 Aug 2021), the economic turmoil following the global shutdown will leave fewer people able to afford to buy or keep a car. That creates an opportunity for a new industry: “budget” vehicles, without computerized gadgets, that are more affordable for the world’s growing numbers of people with low incomes and limited prospects.
More broadly, as we have noted previously in articles such as “More Chip Shortages, Higher Inflation” (27 Apr 2021), it will take months for the chip industry to satisfy current demand and perhaps years to fully supply an increasingly interconnected world.
The lack of chips not only will reduce the auto industry’s output but also that of a range of consumer items, stoking inflation as demand for electronics continues to exceed supply and hobbling job growth.