Despite chip shortage concerns, use dips to buy auto stocks.

The Indian automobile industry has been severely harmed as a result of a shortage of semiconductors. Following in the footsteps of Tata Motors, Indian automaker Maruti Suzuki India has reduced its manufacturing forecast for September due to a semiconductor shortage. According to a statement issued by Maruti Suzuki on Tuesday, the company’s car manufacturing will be forced to cut production by 60% at its Gurugram and Manesar plants due to chip shortages.

A shortage of semiconductors, rising costs, and competition from electric vehicles (EV) are all expected to keep auto stocks underperforming in the future. The auto industry faces numerous challenges, including rising raw material prices, semiconductor shortages, and so on. According to reports, the electric vehicle (EV) segment is also putting pressure on the traditional four- and two-wheeler categories. Despite attractive valuations, automobile stocks will remain under pressure.

Why is there shortage of chips 

Video game enthusiasts had a difficult time locating and purchasing the most recent generation of graphics cards. Apple had to stagger iPhone releases last year, and the latest Xbox and PlayStation consoles were unable to compete. 

Unbeknownst to the general public, the automotive industry was facing a “chipageddon,” as one insider put it, just before Christmas 2020. 

Manufacturers were unable to obtain all of the microprocessors used in new vehicles.

According to a Toyota statement, global vehicle production will be cut in half by September 2021 as a result of the 

Another warning was issued by a number of technological companies. 

Orders for memory chips manufactured by Samsung for its own devices as well as those of other companies are being delayed.

Pandemic impact

What a Pandemic Would Do to You The coronavirus bears some of the blame, as does so much else that is wrong. 

They also purchased new gadgets to keep themselves entertained when they were not working. 

The automobile industry, on the other hand, initially experienced a significant decline in demand and a decline in profitability. 

As a result, chipmakers’ production lines were altered. 

Automobile sales recovered faster than expected in the third quarter of 2020, while consumer electronics demand remained unchanged.

5g Infrastructure 

However, with existing foundries already at capacity, expansion will be difficult. 

“It takes about 18 to 24 months after they break ground for a plant to open,” says analyst Richard Windsor. 

“And even after you build one, you must tune it and increase the yield, which takes time.” 

This isn’t something you can toggle on and off.” 

The deployment of 5G infrastructure is also increasing demand. 

Furthermore, before US trade restrictions prevented it from placing additional orders, Huawei placed a large order to stockpile chips. 

The automobile industry, on the other hand, has a low profit margin and does not stockpile supplies, putting it in a disadvantageous position.


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