Semiconductor Shortage Continue to Affect OEMs

While vehicle Original Equipment Manufacturers (OEMs) had hoped for a better demand and supply environment in 2022, events in the previous five months have forced them to modify their expectations. Geopolitical tensions and the revival of Covid-19 have prolonged semiconductor shortages and caused gasoline price volatility, harming demand in the fourth quarter of the previous fiscal. Due to persistent input cost pressures, OEMs have implemented price increases in recent months.

While domestic sales volume climbed 15.7 percent year over year, it decreased 5% month over month due to frequent price rises and chip shortages, according to data. Exports also declined 5.7 percent on an annual basis, owing to higher energy prices and a supply shortage as China deals with a rise of Covid cases.

Bharat Forge, a Pune-based auto component producer, warned earlier this week in its Q4 financial statement that supply chain concerns are still prevalent and not limited to semiconductors. "Additionally, local lockdowns/ geopolitical situations in particular geographies have a detrimental impact on globally obtained products, resulting in excessive prices," the report noted. Consumer morale is expected to be affected as a result of OEM price hikes and fuel inflation, according to rating agency CareEdge.