Motown bets on cheaper models to offset poor sales

Automakers are stepping up the production of lower-end models, to offset the impact on sales from a shortage of semiconductors that has affected the manufacturing of higher-end variants.Top-end and expensive models use more electronic sensors and chips than the less expensive ones. The infotainment or even the safety features in high-end models require a number of sensors. An unprecedented surge in demand for electronics and personal computers amid the pandemic has resulted in the shortage of semiconductors, which is likely to last awhile. The short supply has affected the production schedules of automakers, industry experts said.Market leader Maruti Suzuki is witnessing more traction in the lower-end variants and entry-level models as consumers want timely deliveries. Many buyers, for instance, are opting for the LXi variant of the WagonR, instead of the VXi or the ZXi that come with more premium features and so have more electronic components.“A premium sedan customer may move to a lower-end variant in order to get a faster delivery of his preferred model,” Maruti Suzuki executive director Shashank Srivastava said.As the shortage of semiconductors is expected to last through at least June, automakers, including Maruti Suzuki, Toyota Kirloskar Motor and Mahindra & Mahindra, are working with their suppliers to have a stable production schedule at their plants and protect sales numbers. Within segments, the upper-end variants are still popular. Thus, a premium sedan customer may move to a compact sedan segment but once in that segment, he would prefer the top variant of the compact sedan.“This is a trend currently,” said Kaushik Madhavan, vice-president, mobility, at consultancy firm Frost & Sullivan, who also cited budget constraints of consumers as a reason for this trend. “We have seen traction with entry-level segment vehicles and also lower and mid variants.”Naveen Soni, senior vice-president at Toyota Kirloskar, said the lower-end segments were seeing month-on-month growth since November 2020. “The basic mobility needs can be fulfilled by this A& B segments, and consumers are willing to compromise on certain specs too,” Soni said. At Mahindra, models such as the XUV 300, Bolero and Scorpio are seeing huge traction.“Manufacturers have started offering features like touch screens, sunroof, auto shift, etc. on low and mid-level variants which earlier available on the high-end variants … This is also playing a big role in increased traction for affordably priced models,” said Veejay Nakra, chief executive, automotive, at Mahindra.Companies typically maximise production of models which add more to their profitability. But now, automotive dealer Nikunj Sanghi said, manufacturers “tend to focus on such models where volumes are high".“The moot question is about delivery for consumers. Lower-end variants require relatively low input of electronic parts and the current semiconductor supply imbroglio does not affect them,” said an auto parts supplier.

from Economic Times https://ift.tt/3ckscdf