Al boom sparks a new chip problem for car cos

The issue was earlier flagged to analysts by Mahindra and Mahindra Ltd (M&M), which makes electric cars, and e-two-wheeler manufacturer Ather Energy Ltd.

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“Memory chips are something that is a supply chain risk/price sensitive thing because shortage obviously is driving premiums in memory chips,” M&M executive director Rajesh Jejurikar told analysts and investors on an Il February earnings call. “So, a memory chip is something which is a watch-out across the portfolio right now. That's the new rare, rare earth, let's call it that.”

However, Jejurikar assured that the situation was under control. “We are buying in the market, we are paying a premium and we have a set of mitigating actions,” he said. “We are covered in the short run but it’s almost like going back to semiconductors of covid... the risk could be quite severe.”

Then, last week, during a meeting with analysts of Nuvama Institutional Equities, Bengaluru-based Ather Energy highlighted memory chips’ inflation owing to supply crunch as one of the near-term headwinds to the business.

Queries sent to automakers Maruti Suzuki, Tata Motors PV, Hyundai Motor India, Ola Electric, Hero MotoCorp, Honda Motorcycle and Scooter India, Bajaj Auto, TVS Motor Company and auto suppliers like Samvardhana Motherson, Sona Comstar, and Bosch remained unanswered till press time.

As chipmakers shift manufacturing capacity toward HBM, supplies of conventional memory chips used in cars are tightening