The auto sector is on the radar as it continues to reel under the global semiconductor shortage pressure. To get a sense of the ground reality, CNBC-TV18 spoke to Vivek Chaand Sehgal, chairman of Motherson Sumi Group.
Sehgal said, “There is hardly any way to measure what the respite would be. But yes, a lot of the plants which were struggling are coming back on steam. But I think, the situation is slightly better, but not so much better what people would imagine it to be. I don't think it is going to happen overnight, I think it will take a little bit longer, it could be anywhere between 9 months to 1.5 years.”
He further added, “These are sophisticated chips. I don't know what people are imagining and what kind of chips there are. But these are very sophisticated chips, it takes years to stabilise. Unfortunately, the flooding in Germany and the sudden rise of COVID cases in Malaysia and few other countries augmented this particular problem. But it is not something that you can solve overnight.”
On demand picking up, Sehgal said, “The demand is there, we are seeing that, because the pressure is coming from the car makers. A lot of the car makers that we know are actually producing the cars so that they can fit the semiconductors and the electronic parts as they come in from the suppliers. So definitely, a car maker would not like to keep a car produced in the yard without the electronics and all the other parts. So, we have to keep producing and keep waiting for the car makers to tell us what exactly they need, so that we can produce that for them.”
On electric vehicles (EVs), he said, “The demand is there for every kind and definitely, EV is being pushed by a lot of governments all over the world, which is very good. But Motherson is agnostic to the engine so it doesn't make any difference to us. In fact, the more we go towards EV, the more the value for our products go up. But they are in the same boat, in the sense that their demand for electronics is even higher than IC engine.”
On PLI scheme, he said, “If it is for battery makers and electric vehicles, definitely, we hope that the demand goes up. Also, I hope that the Government of India is going to encourage manufacturers of chips and things like that. Ofcourse, it takes about a year-and-a-half to two years to stabilise, but then that could be a good beginning. So, we welcome that from the government side.”
On rising cost of raw materials, Sehgal said, “Most of our production globally, with the kind of price increase in the raw materials that is happening, automatically gets reset. So we are not, at this moment, focusing on just that. I think the key focus area for all of us is to help our OEMs deliver more vehicles to the market. All these things, we will have time to sort out at a later date. There is a tremendous amount of pain in the system so a lot of the car makers are telling us where they want help, what they want us to focus on. So, our attention is more towards this and keeping the production going.”
For full management commentary, watch the video.