Karachi, June 17, 2021 (PPI-OT): Pakistan Autos: Supply Chain Disruptions in Auto Industry

The global auto industry is in the middle of massive global crisis of semiconductor chips which is to persist well into CY21. The scarcity has led to supply chain disruptions around the world, impacting the production of leading global auto players like Ford, Volkswagen Jaguar Land Rover etc.

The global shortage is caused by surge in sales of electronic devices amidst Covid-19 and snowballing of electronic content in cars while the drought in Taiwan has further deepened the crisis. The market for semiconductor chips is likely to grow at a CAGR of 8% in the backdrop of robust upturn in demand.

The global shortage has had a trickle-down effect on the production of local auto industry, causing a slowdown especially in luxury SUV and 1300CC+ sedan segment in which consumption of semiconductors chips is higher.

We can expect the supply to normalize in later half of CY22 and an increase in production level in FY23. We like INDU as our preference is based on 1300CC+ segment where prompt upgrades are expected to drive sales momentum in medium to long term. In addition, we like PSMC due to a minute effect of chip scarcity and a major beneficiary of budgetary measures.