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Prolonged chip crunch delays deliveries of two-wheelers in India

India's car manufacturers might be expecting prolonged chip shortages for both cars and scooters. According to The Hans India, Maruti Suzuki India's latest earnings declined significantly by 47.8% due to chip shortages and rising costs of raw materials.

For the third quarter for FY2021, the carmaker's earnings dropped on-year to INR10.42 billion (US$139.2 million) from INR19.97 billion.

Neeraj Mohan, head at management consulting company EY-Parthenon, said that the chip crunch seemed to have developed into a long-term challenge for carmakers in India. Mohan said shortages might extend at least to 2025 given that installing new production lines would force long delays before any actual production.

Currently, carmakers are either turning back to older systems with fewer special features, or delaying deliveries. The backlog of orders of passenger cars reached 700,000 units. During a holiday season, backlog could increase to nearly one million units.

According to Hemal Thakkar, board director of Crisil Research, cited by the Times of India, over 30% of the car chips sold in India were for older systems. While chip foundries are giving capacity to more advanced chips, the priorities of older chips are downgraded. Therefore, India's demand for older models is left unmet.

Thakkar said even deliveries of two-wheelers are being delayed by 54-58 weeks due to prolonged chip shortages. Sales of two-wheelers are expected to fall by 30%.