Tussle China-Taiwan could lead to semiconductor shortage: car dealers

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New Delhi:

As the potential risks of the war between Taiwan and China escalate, a shortage of key automotive raw materials – semiconductors – is looming again, the Federation of Automobile Dealers Associations of India said Thursday.

The president of the association, Vinkesh Gulati, said that after the war between Russia and Ukraine, the world is now facing the possibility of a war between Taiwan and China.

“This threatens another imminent shortage of semiconductors as chip maker TSMC raises a red flag that if war strikes, Taiwan’s chip makers would be rendered ‘unusable’,” said Mr Gulati.

Hours after U.S. House Speaker Nancy Pelosi left Taipei after a visit that has left Beijing unsettled, live fire drills began Thursday night in six identified zones around the island. Pelosi’s visit, which is also the highest number of US visits in more than two decades, infuriated China and the communist nation warned the US it will “pay the price.”

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In terms of auto sales, total vehicle retail sales for the month of July 2022 saw an 8 percent year-on-year decline. July is generally considered a lean month before the festival season hits in August.

Segment breakdown, tricycles and commercial vehicles were the only segments to grow 80 percent and 27 percent over the month.

Retail sales of two-wheelers, passenger cars and tractors fell 11 percent, 5 percent and 28 percent, respectively, according to data released by the Federation of Automobile Dealers Associations (FADA).

In July, there was an erratic monsoon in most states. While western, central and southern India mainly suffered from excessive rainfall, the Ganges plains and eastern India witnessed insufficient rainfall, it said.

The erratic monsoon also led to a decline in Kharif’s seeding, as paddy acreage fell by 13 percent at the end of July. Tractor sales, which showed good growth until a month ago, experienced a significant dip in July.

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The two-wheeler retail run witnessed poor demand as rural India continues to underperform. This coupled with high inflation, erratic monsoons and high cost of ownership continue to keep customers at the bottom of the pyramid at bay, it said.

In the tricycle space, demand continued to recover, although full recovery to pre-Covid levels is still some time away.

It said it is clear that e-rickshaws were the largest mover in the segment. The recovery in demand in the tricycle passenger category also showed that Covid is now behind us as passenger traffic picks up again.

Commercial vehicle retail data continues to show good demand as government push on infrastructure helps customers finalize their purchases. Apart from this, the bus segment also witnessed the start of a recovery in demand as educational institutions and offices return to normal functioning.

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The passenger car segment is witnessing a dream flight as retail sales are already higher than in 2019.

“Even though there is a decline in the numbers in July, the industry is constantly introducing new models, especially in the compact SUV segment. In addition, better offerings in the coming months will help reduce customer fears due to long wait times. We are also urging all passenger car manufacturers to realign their inventories with market demand and avoid pushing low moving inventories,” it added.

As for the outlook, it remains “cautiously optimistic” as the country enters the festival season.

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