Half a million fewer cars to be sold this year due to semiconductor shortage, says ICRA

That translates to about Rs 1,800-2,000 crore in lost sales opportunity, the ratings agency said.

ET was the first to report last month that the Indian car market could lose 500,000-600,000 units in sales due to the supply chain woes shortage.

If not for the supply chain issues, the industry would have this year crossed its previous peak annual sales of 3.4 million units seen in FY19. ICRA has now revised its sales forecast for FY22 downward to 8-11%, which translates to around 3 million units.

The semiconductor crisis peaked in September, when an estimated 120,000 units sales was lost, as per a presentation from ICRA. While the supply situation is expected to improve going forward, normal supplies are only expected towards end of 2022.

Due to the shortage of semiconductors, waiting periods for some of the popular car models have gone up to as long as 12 months. Automakers have been forced to launch variants of their models with fewer features, thus reducing the semiconductor content per car and thus cutting the waiting periods.

While a supply shortage has made the agency revise its growth forecast for the passenger vehicles market, it was a demand issue when it came to two-wheelers. ICRA now expects the two-wheeler market to shrink by 1-4% in FY22 from an earlier low single-digit growth forecast.

This has been primarily due to sharp increase in prices of two-wheelers over the past two-three years on account of several regulatory changes and increased input costs. Higher fuel prices further deter consumers.

ICRA’s growth forecasts for the commercial vehicles and tractor segments remain the same at 18-22% and 1-4%, respectively.