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Current Affairs

Covid-19 effect on production of automobiles

Date: 02 April 2021 Tags: Miscellaneous

Issue

Several automakers have requested potential customers to bear with a short waiting time for vehicle delivery citing production delays.

 

Background

Covid-19 proved to be a disaster for many industries including automobiles when the forced lockdown affected supply chain.

 

Details

  • Waiting time for cars have become longest post-pandemic due to non-availability of critical parts such as semiconductor chips.

  • Indian as well as global manufacturers have been forced to reduce their speed of production due to non-availability of these critical materials.

  • Integrated circuits (IC) chip are commonly used component in cars, electronic goods, medical devices, and smart appliances.

  • IC is made up of resistors, transistors, capacitors, which are placed on a single chip to perform a single or multiple functions.

 

Reason for shortages

  • As the globe went towards lockdown, people started buying more electronic items such as computers, phones, video games etc to tide over boredom as well as work.

  • As factories were shut, producers cut down on semiconductor chip manufacturing. This upset the balance between demand and supply, causing the current problems.

  • The renewed demand has forced companies to adjust production and supplies to critical sectors such as automobiles.

  • Cars makers usually do not have stock of chips and rely on dynamic supply chain based on demand from customers.

  • With the demand for cars reduced during pandemic, automakers reduced their orders, forcing chipmakers to produce chips for other purposes.