Automakers in India have been badly hit. What started off with a slowdown in mid-2019 extended to a complete shutdown in early 2020 and then on to plummeting sales only to pick up very gradually over the past few months. Even as the auto industry bounced back faster than expected, the segment now faces acute shortage of spare parts and vital accessories.
Severe Semi-Conductor Shortage
The auto industry is hit by shortage of several spares but more particularly due to shortage of semi-conductors. This has caused Ford India to shut down its Chennai plant for a week following the Pongal holiday. The plant shut on 14th January for the 3 day festivities and have announced an extension of the shutdown till 24th January.
Even as the impact is currently only felt at the Chennai plant, production at the Sanand, Gujarat plant will also be affected over the next 2 to 3 months. The shortage of semi-conductors would continue for the next quarter and while the company is trying to streamline supplies, global conditions do not appear favourable.
Semi-conductors are vital electronic parts in the mobile phone, gaming console and other handy gadget segments and there the demand is much higher. The recent pandemic which has seen the entire world working from home has seen a further spurt in demand for such gadgets. These parts are also vital for carmakers where they are need in tyre pressure gauges, rain sensing wipers and parking sensors besides in infotainment systems.
This shortage has affected the Ford US plant, Audi and Volkswagen factories in Germany and the Honda plant in UK while other automakers also cite similar issues. The situation is worse for Ford India as it is from the Chennai plant that the company conducts its export operations.
The Ford India plant has been forced to shut down for 10 days. If no alternative source is found, production could be impacted by over 50 percent. Ford India made just 7,000 units in December 2020 while its cumulative April to December production stood at under 65,000 units.
Ford Brazil Plants to Shut
Earlier last week, Ford Motor Co also revealed that it will cease production in Brazil, closing 3 plants and engine sales of the EcoSport as it gets its global restructuring plans in order. Production has ceased at the Camacari and Taubate engine plants in Brazil, and the company's Troller plant in Horizonte, Brazil, will continue to operate until the fourth quarter of 2021. Once inventories are sold, sales of the EcoSort, Ka and Troller T4 will come to an end and this plant closure will affect around 5,000 persons.
Semi-conductor, container and steel shortage is also likely to impact the entire auto sector and industry sources state that about 1/5th of production is likely to be hit in Q1 2021. In the mean-time the semi-conductor market is set to boom to around $129 billion in 2025, tripling its size as compared to 2019. Major players in this segment include STMicroelectronics, Infineon Technologies, NXP Semiconductor, Texas Instruments and Toshiba.