Chip Shortage Slows Auto Inventory Build-Up For Dealers In July

Inventory build-up at auto dealerships slowed in July even as restrictions to contain a deadlier second surge of Covid-19 were eased.Vehicle registrations—a measure of sales at dealerships—rose 27.8% sequentially and 34.4% over a year earlier to 15.62 lakh units in July, according to data from 1,493 regional transport offices in 33 states and union territories. All segments saw an increase.To be sure, the year-on-year jump came on a low base as the economy had just started reopening a year earlier after the nationwide lockdown..Inventory TrendsTwo-wheeler and passenger car makers continue to add inventory—the gap between wholesales and retail sales—but at a slower pace in the month of July, according to numbers collated from the the Ministry of Road Transport and Highways' Vahan database and production figures released by automakers. That was partly because of the global chip crunch.The semi-conductor shortage is now becoming a deep-rooted problem for the passenger vehicle segment, the Federation of Automobile Dealers Associations of India said in a statement. Based on its survey of dealers, 60% of car dealers have at least a two-month waiting period for select variants, 35% reported a more than four-month waiting period for select models.Maruti Suzuki India Ltd., the nation's largest carmaker; and component maker Minda Industries Ltd. are already looking to temporarily halt production in August amid the shortage of chips.For Bajaj Auto Ltd., inventory build-up slowed in July as it exported more units than domestic sales.Tractor dealers, too, are exhausting existing stock to meet retail demand even as factory-gate sales dipped sequentially in July. The three-week slowdown in monsoon activity from mid-June to mid-July temporarily affected sowing of Kharif crops, leading to lower sales in July, Escorts Ltd. said in an exchange filing..Bulk of the demand returned in key states like Maharashtra, Gujarat, Tamil Nadu, Uttar Pradesh and Karnataka as cities eased restrictions. .Passenger CarsMost passenger carmakers except for Tata Motors Ltd. and Mahindra & Mahindra Ltd. saw their July sales cross the March 2020 (pre-Covid) levels. Both the companies have been impacted by semiconductor shortages..Two-WheelersAmong the two-wheeler companies, Hero MotoCorp Ltd. saw retail registrations fall month-on-month in July. Overall, two-wheeler sales continue to be below pre-Covid levels..Tractors Sales continue to be healthy even as there was a fall in factory-gate sales in July for M&M and Escorts due to a delay in monsoon. The data available suggests lower inventory. .Commercial VehiclesRevival in commercial vehicle sales continued though sales are yet to cross the pre-covid levels. Slowdown in commercial vehicle sales began in the second half of calendar year 2019.

Chip Shortage Slows Auto Inventory Build-Up For Dealers In July

Inventory build-up at auto dealerships slowed in July even as retail demand picked up.

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