The global chip shortage hit passenger vehicle sales in September, traditionally a period associated with higher car sales due to the festive season. Major carmakers in India like Maruti Suzuki, Hyundai, Mahindra & Mahindra reported declining new car sales. Further factors like rising production costs, extended waiting periods, and increased new car prices have added to this.
The festive season, celebrating the spirit of festivals like Navratri, Dussehra, and Diwali, has been a critical driver in car sales. The primary reason behind this is, the celebrations are auspicious to bring home something new, especially a new car! And also, massive discounts and goodies from various automakers in the past have made these a buyer’s favourite. This year, surprisingly limited festive-season deals and offerings from various auto brands could adversely impact the festive sales in the country.
But for the pre-owned car industry, the situation has turned out to be a positive development, especially for an organized pre-owned seller like us with a large inventory of 5000+ cars across makes and models instantly available for purchase.
Consumers planning to buy a car for the festive season can choose a vehicle of their choice and get it home delivered within a day or two, at a time convenient to them. With benefits like pre-purchase quality checks, fully refurbished cars, 6-month warranty & 7-day easy return, a pre-owned car offers most benefits of a new one. And it’s truly a celebration to get your hands on a car this festive season rather than wait for months to get hold of a new one.
Why did the chip shortage occur?
The primary reason for the chip shortage was due to the Covid-19 pandemic and the subsequent lockdowns that affected the chip manufacturers in countries like Japan, South Korea, China, and the US.
Vikram Chopra, co-founder and the CEO of CARS24, told Bloomberg Television, “New car production will be cut dramatically, and that will definitely result in high demand for used cars,” he further added, “In the next six months we are going to see a pretty big impact,”
Consumers of semiconductor chips, primarily car manufacturers and consumer electronics, have faced a shortage of chips, leading to disruption in production. The chip shortage is measured in chip lead time, which is the time between when a chip is ordered and delivered. According to research by Susquehanna Financial Group, the chip lead time increased to 17 weeks in April, from around 12 weeks at the beginning of the year.
The usage of semiconductor chips in the auto industry has gone up globally with technological advancements and new cars models equipped with more and more electronic features such as driver-assist, navigation, and hybrid-electric systems, besides the engine control unit.
Best-selling car models like Hyundai Creta, Kia Seltos, Tata Nexon, and Maruti Swift continued to see high demand. Also, the recently launched cars like Nissan Magnite, Tata Punch, MG Astor received huge bookings, even though there is not enough clarity from the automakers on the delivery time of these vehicles.