Maruti output nears normal levels as chip supplies improve

Maruti Suzuki is likely to produce 145,000-150,000 vehicles in November, inching closer to the normal monthly average, said people in the know, citing tentative production plans shared with component suppliers. In September and October, production had fallen to 50-60% of the usual output because of a shortage of semiconductors, a key component in modern cars and SUVs.

The output for December is likely to be even higher than November, due to resumption of normal production of semiconductors in Malaysia, with an improvement in the pandemic situation. The Southeast Asian country is a major global supplier of the component.

Maruti Suzuki’s production in October was 40% higher than September and the output in November is expected to 20% higher over the current month. From December, things should be closer to the average sales, according to people in the know.

Its monthly average production during the January-March quarter, before the second wave of the pandemic struck the country, was 167,000 units.

Maruti Suzuki didn’t respond to an email seeking comment.

A recent Morgan Stanley report said the average utilisation of Malaysian fab companies has recovered to 89% in September from 51% in August. As per Malaysian government policy, fabs are allowed to run at 100% utilisation once their labour force is fully vaccinated.

Usually, it takes 6-8 weeks for the chipsets produced in Malaysia to reach the manufacturing sites in India. Since chip manufacturing is touching almost 100% output in September and October, the supplies in November and December are likely to be better, say experts.

If Maruti Suzuki is able to produce around 150,000 units in November, it would be the highest November production in four years, according to data from the Society of Indian Automobile Manufacturers.

The automaker’s record high November production was in 2017 – the Suzuki Motor unit had produced 154,000 vehicles that month.

The expected production ramp-up next month will help the company cater to festival demand for the first few days of November.

The September monthly output of 81,278 units was the lowest for the company in at least eight years, sans the months impacted by lockdown. To be sure, the July-September period this year was the worst for the market leader in 21 quarters in terms of output, but since then there has been an improvement.

Average production of Maruti Suzuki dropped to 121,000 units in the last three months. It produced close to 100,000 cars in September. But almost 20% of those remained in the yard for the chipsets to be installed, and were not dispatched to dealerships. So, if the company is able to secure higher chipsets in the coming weeks, it may be able to dispatch a higher number of cars in November and December, say people in the know.

Due to the severe shortage of parts, Maruti Suzuki’s order backlog has swelled from 170,000 vehicles to 250,000. Meanwhile, inventory at the dealership is just enough to meet a couple of weeks’ delivery.