While customers usually get bargain deals or handsome festive discounts during this period, this time they are paying higher for a host of items ranging from mobile handsets and TVs to cars due to the chip shortage. Freebies have vanished from most of the automotive showrooms as manufacturers struggle to meet demand.
"If you look at the demand parameters, which is reflected in bookings or in queries, they are very good. However, the supply side this year unfortunately is a little muted because of this semiconductor issue.
"That is the reason why the number of bookings have built up but supplies have not come," Maruti Suzuki India Senior Executive Director (Marketing & Sales) Shashank Srivastava told PTI.
The auto industry, he further said, "as per current estimates has 4.5 lakh to 5 lakh pending bookings and Maruti Suzuki alone has about pending bookings in the range of 2.15 lakh to 2.2 lakh units."
The problem has not magnified only in October but has been building up since August through September, Srivastava said, adding he expects "the discounts and the bonanza offers will be very muted this time because of the supply constraints."
In contrast to the usual inventory build up of around 40-days stock by firms at the dealership level to meet the spike in retail demand during the festive season, especially around Navratra and Diwali, this time it is less than 15 days, he said.
The estimated stock inventory on October 1 was around 1.75 lakh units as compared to wholesales of around 3.35 lakh units in the same month last year. It was around 2.25 lakh on September 1 this year.
According to Society of Indian Automobile Manufacturers (SIAM) Director General Rajesh Menon, as a result of the severe shortages of semiconductors faced by tier I and II component suppliers, vehicle manufacturers are facing supply constraints of parts such as engine electronic control units, keyless entry, ABS systems and infotainment systems.
As far as consumer electronics are concerned, CEAMA President Eric Braganza chip shortage is "the biggest challenge ahead of the consumer electronics industry, because price increases are on the cards."
Offering Consumer Electronics and Appliances Manufacturers Association''s (CEAMA''s) views, he said as of now, the industry has not seen an immediate effect on the supply side due to the shortage.
"However as we enter 2022, there are high chances of chip shortage affecting the supply side and leading to an increase in prices of final goods. We have already seen this in the global markets and the same could happen in the domestic market due to the domino effect," Braganza said.
Expressing similar views, Counterpoint Research Senior Research Analyst Prachir Singh said the sector in India had been relatively less impacted in terms of availability of products due to the global component shortages for the first half of the year.
"However, this crisis is likely to impact the Indian manufacturing supply chain post-festive season...In terms of pricing, we have seen multiple product segments pricing has been increased slowly over the past few months.
"This trend is likely to continue for the next few quarters as well," Singh said, adding price increases due to component shortage would impact consumer demand in the price-sensitive Indian market.
Confirming the development, Super Plastronics Pvt Ltd (SPPL) CEO Avneet Singh Marwah said the chip shortage problem has led to "a mass price increase" as there has been a rate hike of 35 per cent in the last quarter for high definition and full high definition chips, followed by 30 per cent more in the next quarter.
For 4K TV sets, there has been a price increase of 50 per cent with a lead time of 60 days minimum.
The company, which is the licensee for brands such as Blaupunkt, Thomson, Kodak, Westinghouse and White-Westinghouse for selling and manufacturing LED TVs and other products, foresees the industry facing production issues going forward.
"TV production will be interrupted in the months of November and December. Production can be affected by 20-30 per cent in the coming quarter, this may continue till the end of 2022," Marwah said.
Semiconductor is an indispensable part of modern day electronic devices ranging from household appliances, laptops, smartphones and cars. Its demand has gone through the roof during the COVID-19 pandemic as people have been forced to work from home, thereby fuelling demand for electronic devices.
The pandemic also drove demand for cars as people preferred personal mobility over shared or public transport due safety and hygiene factors.
EY India Partner, automotive sector, Som Kapoor said, "Semiconductor shortage continues to hit production of electronics-enabled devices from cars to computers to consumer durables. The demand for all these is hitting the roof across the world with work from home and social distancing."
From an automotive industry standpoint, it has been a double whammy where both the usage of semiconductors is increasing day by day with enhanced infotainment, sensor-based features, etc and original equipment manufacturers (OEMs) are struggling to meet the ramped up demand while launching new feature-rich models, he added.
The crisis, however, offers a silver lining for the Indian manufacturing sector.
"There is a huge opportunity in India for manufacturers of semiconductors to invest, not only for the captive automotive market, but also for meeting the requirements of other consumer goods and electronics industries," said Menon of SIAM.
On the outlook, Kapoor of EY India said,"While there are major capacity additions being planned worldwide, given the concentrated and complex supply chain, it is likely that the problem shall continue to persist in the immediate future as well."
"A cross-industry government supported taskforce based approach may help tone down the concern from both a short and long-term perspective," he added. PTI KRH SR MSS RKL ABM