EconomyFinancialSuzuki launches a new model in Mexico to compensate...

Suzuki launches a new model in Mexico to compensate for the shortage of chips

Suzuki is one of the latest car manufacturers to hit the chip shortage. The Japanese assembly company maintained vehicle production during the first four months of the year, thanks to a healthy inventory of semiconductors that it hoped would be sufficient while the manufacturers of these components regularized the situation during the first six of the year. But this has taken longer than expected and Suzuki has had to stop several of its assembly lines.

In the more sophisticated models, there are up to 80 different computers that control everything from touchscreens to transmissions and partially automated driver safety functions. Even the least digitized have four or five computers. If there are no semiconductors, there are no chips, and therefore vehicles cannot be made.

Suzuki has had damages in three of its plants in Japan, where it produces the Swift and Ignis models. Also that of Indonesia, where Ertiga comes from, is strongly affected, as is that of India, where the Baleno hatchback is assembled, which will begin to arrive this month in Mexico.

“The next three or four months are going to be very, very complicated, practically all of our models are going to be affected, we will have less than half the inventory we had before the semiconductor crisis,” says Gerardo Macías, sales manager of the division. of automobiles at Suzuki.

The Mexican subsidiary had a sufficient stock of models thanks to the fact that it did not reduce its orders to the plants during the pandemic. This even allowed it to serve customers who came to the brand after not finding the model they were looking for at the competitor’s dealership.

“We survived the rest of the brands for a couple of months. While other manufacturers started with problems from March or February, we held out until May ”, explains Macías.

Suzuki increased its sales by 10% in the first two months of the year, with 5,512 units sold from 5,009 sold in the same period of 2020, when the market was not yet under the ravages of the coronavirus pandemic. In February, Suzuki entered the top 10 of the best-selling brands in the market, displacing Ford and Hyundai, according to data from the Mexican Association of Automotive Distributors.

But inventory has run out and availability of virtually all models will be limited from June through September. This will impact Suzuki’s sales goal of 36,000 units for this year. “We believe that we will be able to sell 32,000,” says Macías.

Suzuki will seek to make up for the shortage of units with the launch of a new hatchback called the Baleno, of which it expects to sell about 2,000 units this year. This model, slightly more spacious and longer than the Swift, is a direct competitor to the Kia Rio and Hyundai Accent of Mexican manufacture.

The chip shortage has also reached South Korean manufacturers Hyundai and Kia, which have had to start shutting down some lines where the lowest-demand models are produced to reserve the chips for other higher-volume vehicles, especially SUVs.

Other manufacturers, such as Volkswagen, Nissan and Toyota, have already reduced production of their sedans and hatchbacks globally to maintain production of other larger and more profitable models.

Although in some markets, such as the United States, subcompact sedans and hatchbacks have practically disappeared, in Mexico they still represent a quarter of total sales, according to data from Inegi, so those manufacturers that have available units will be able to earn an additional volume of market. “In other conditions it might not be like that, but at this moment we are not starting from a normal context: there is no free competition because there is no free production,” says Macías.

Suzuki managed to secure a first batch of the new model, before the Indian plant had to cut production due to a lack of chips. “For the next quarter we will have around 500 units, which is reasonable, however, in the rest of the models we will be very affected,” says Macías.

Suzuki expects to reach a 3% market share this year. “Last year we were the number 1 importer in car sales in Mexico. This year we plan to stay that way, ”says Macías.

Suzuki negotiates new semiconductor orders with Reneses

Unlike other manufacturers, which depend on a Taiwanese semiconductor supplier, Suzuki has a local one: Renesas Electronics, and it might not have been seriously affected if one of its supplier’s factories, northeast of Tokyo, had not caught fire in March, due to a power failure.

This incident further exacerbated the global chip shortage and affected Japanese automakers. Suzuki among them.

Renesas Electronics said in early June that replacements for fire-damaged equipment arrived in late May and should be up and running by mid-June. That would allow the company to return to full production.

“But there are buyers who are offering more to have them already. Tesla, for example, is paying in advance as long as they get others out of the line, ”says Macías. “We depend on what the parent company negotiates with the supplier. There have been meetings, there have been approaches ”, he adds.

The manager estimates that in September a new batch of semiconductors will arrive in September, giving Suzuki plants a break. “But we are going to recover the volume that we used to have until next year,” concludes Macías.

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