Amidst Russia & Ukraine war, Chips meant for Russian Auto companies to be diverted to Indian units of South Korean & European Auto makers

Russia & Ukraine war, 13 days have passed, a lot of developments happening, the whole world is looking towards India for wheat export, similarly, Indian auto units of South Korean as well as European Auto makers tend to benefit as the chips meant for Russian Auto companies would be diverted to these units.

Industry experts are of the opinion, as we all are aware, there exists semiconductor shortage across the world, amidst war, the European automakers have decided to stop production in Russian, it is 1.5-million-unit automobile market, thus it would mean chips meant for Russia would possibly get diverted to other growing global markets, such as India.

The above news, is definitely good news for all Indian buyers, as the waiting period were up to 10 months to get delivery of their cars as well SUV, due to shortage of semiconductors which is a critical component in the modern vehicles, due to which the automakers had to slash production.

The beneficiaries of Indian units would be

-Kia

-Hyundai Motors

-Skoda

-Volkswagan

-Renault

-Luxury carmakers Mercedes-Benz

During the previous year, the manufacturers in India, incurred estimated revenue loss of about $5 billion (or about half a million vehicles), due to production disruption, amidst strong demand for cars and SUVs.

India might receive precedence, if they redistribute the chips, since, this is also a global launch market for a few of their vehicles.

The chips must be consumed; hence they would be distributed to other regions of the world, stated Venkatram Mamillapalle, managing Director of Renault India. However, it has got a lead time and the impact might not be seen immediately. If the situation persists till April, India too may be able to receive a part share from the allocation meant for Russia.

On the condition of anonymity, one of the senior executive at an East-Asia headquartered company stated that, chip allocation to India may be increased on rising uncertainty of production in Russia. Diversion of Chips to markets having visibility of superior margin as well as volume may be logical step and also an optimal solution to protect the financial performance at the parent level, he added.

Martin Schwenk, Mercedes-Benz, India Managing Director stated that it would be cynical, to talk about allocation. However, if a part is available, it would be shared across varied markets and also it would be logical, he stated.

The German Automaker has an order for about 3000 units on its books in India.

Korea's Kia as well as well as Hyundai may be the biggest beneficiaries if allocation is increased to India, owning to their large market share in SUVs, the fastest growing passenger vehicle segment in India.

Guarave Vaangal, Associate director at S&P Global Mobility, stated that, the situation is very dynamic. India might lose out or can also be the beneficiary of the Russia and Ukraine crisis. It all depends on as to how long the conflict situation continues. If it tends to prolong, the chips might get distributed to other parts, but there is also the likelihood of supply chain disruption impacting supplies in India.