November 15, 2021 05:49 PM
The semiconductor shortage will likely lead to a fall in Bajaj Auto’s exports as the automotive industry continues to grapple with the severe crunch in chip availability, which has dragged on for nearly a year now.
The Pune-based company lost half of its planned production during the July-September quarter due to the semiconductor shortage, according to a senior official. The Pulsar, Avenger and Platina maker’s domestic volumes in October plummeted 26 percent to 198,738 units from the same month last year.
Rakesh Sharma, executive director, Bajaj Auto, said: “We lost 50 percent of Pulsar, KTM, Husqvarna and Dominar volumes due to the shortage of semiconductors (in Q2FY22). But has this shortage resulted in exactly that many sales loss numbers? I don’t think so.”
Dismal demand environment
Demand for two-wheelers across most segments has remained subdued over the last several months with festive days, too, witnessing a poor offtake. The April-September period witnessed 9 percent growth in wholesale volumes of two-wheelers, according to data supplied by the Society of Indian Automobile Manufacturers (SIAM). However, the data is not strictly comparable since there was a lockdown during that period last year.
Two-wheeler makers say that retail demand from rural areas has not picked up while demand from urban markets has been slower than expected. The 30-35 percent increase in end prices of two-wheelers coupled with the impact of the lockdown due to Covid-19 has crippled demand.
“In overseas markets we are going to see the loss in numbers for one or two months because of the long supply chain and we will begin to see the loss in retail in overseas markets because stocks are running out in November, December and January,” Sharma added.
Why exports matter for Bajaj Auto
Exports are a crucial component in Bajaj Auto’s overall automotive business as more than half of its production is sold overseas. The company sold nearly 56 percent of its two-wheelers in markets outside India during the April-October period in FY22, at 1.29 million units. The company exports to 79 countries in Latin America, Africa, Asia, Middle East, the Asean region and Europe.
Asked if the availability of chips is improving, Sharma said: “The situation is dynamic. It might appear that supplies are improving, and then suddenly, the problem reappears. That is why we feel it is uncertain. There are other companies like Tesla who are setting up huge capacities and soaking up semiconductor supplies. This has had a ripple effect on us. So, this up and down in supplies will continue for some time.”