Case Study | Tata cuts down production: Chip shortage a headache?

Tata Motors logo
Tata Motors logo

Tata Motors will be pushed to dip the output of units in the coming months. The villain, of course, is the shortage of semiconductors. The automaker is one of the last men standing among the top five to declare cut down in manufacturing because of chip shortage.

The shortage in the availability of chips continues to affect the automobile sector worldwide. The latest lockdowns in East Asia have exacerbated the supplies, and thus Tata Motors is pushed to an average production and cut short volumes in the coming months, said Tata Motors in a report.

The automaker giant of Nexon and Harrier did not point out the amount or dates of the unit cut down. Tata Motors manufactures cars and SUVs at Pune, Maharashtra, and in Sanand, Gujarat.

In August, automobile industry leader Maruti Suzuki mentioned that their volume of output in September could be 40% of its normal monthly output because of the shortage in semiconductors.

Because of this, Maruti will remain shut shop in Haryana plants while Suzuki Motor Gujarat will shutter its plant in Gujarat. That will impact Maruti’s market share, beginning with the wholesale phase and followed by retail.

In addition, Tata Motors said that the situation is dynamic, and they will continue to operate to alleviate the hit by the shortage and strive to meet the customers’ orders through a rapid, multi-angled approach including close contact with supply chain partners, obtaining chips from the market, leveraging alternate chips and managing their model.

Global automakers have also alerted of the pain that their companies will go through and have taken sharp cut-downs this year due to this acute shortage of chips.

Tata Motors’ revenue from retail sales at JLR, which accounts for most of their revenue, dipped 18.4% last year as the chip shortages pained production. However, revenue increased 14.7% to Rs 61,379 crores by the end of September 30th.

The automobile industry has been in a brawl with semiconductor scarcity for almost a year now. This problem rose to the surface when utility vehicle specialist Mahindra & Mahindra announced manufacturing cuts last year.

Many automakers, including MG Motor, Nissan Ford, Bajaj Auto, and, Renault have had to cut short production due to this reason.

Maruti’s and Tata’s decision to cut down productions arrives just as their dealers prepare to place orders to strengthen inventory with the commencement of the festive season.

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