There is more to the chip shortage in auto industry than meets the eye

Auto industry experts say that some of the models still use older generation chips and that could be compounding the problem for carmakers as they are lower down the pecking order for global chip makers.

“Over 30% of the chips used in India are older generation and since the auto industry is lower down the pecking order when it comes to chip consumption, the chip industry has not been focusing on these older generation chips.” Auto OEMs, he added, have not moved from “legacy to other modes particularly in some of the older best selling models. The new launches use newer generation chips where the supply constraint will slowly ease out. But the problem will persist with older models,” a Times of India report quoted Hemal Thakkar, director, Crisil Research, as saying.

Since auto parts supplier and OEMs use chips that are older than what are currently being used in manufacturing smartphones, the challenge of procuring them gets exacerbated due to a crippling global shortage.

“The generation of chips that the auto industry uses is five years behind smart phones and consumer durables. Hence in supply terms, it is even lower down the pecking order of priority,” Vikram Mohan, MD, Pricol, told TOI. He further adds that his company is “onboarding new chips and getting OEMs to homologate,” because the “cost impact is minimal — $2-$3 per vehicle.”

The problem is not restricted to only carmakers. Even two wheelers that use lesser number of chips are facing delays due to the shortage.

“This current crisis will take till June-July to be sorted out,” said Thakkar.

On the two-wheeler chip shortage, Mohan calls it a “blood bath”. He adds, “There is a 54-58 week delivery time wait and we are selling 30% less than we normally do to this segment.” Normalcy, he added, is not likely before September this year.

(With inputs from Times of India)