From Tata Motors Passenger Vehicles (TMPV) to Mahindra & Mahindra (M&M), carmakers are finding it increasingly challenging to procure chips which have applications in electric vehicles to car infotainment systems. Electric two-wheeler (E2W) maker Ather has flagged persistent
rise in chip prices despite expectations of moderation.
TMPV Managing Director (MD) and Chief Executive Officer (CEO) Shailesh Chandra acknowledged that the company was paying higher prices to secure semiconductor and electronic components, although it had managed to avoid production disruptions so far.
“There is definitely some level of stress that we have on the semiconductor side, electronic parts, but we are securing the supply or we are paying higher cost for that,” Chandra said during the company’s September-quarter earnings call.
Tata Motors had not lost production because of chip shortages, but securing supplies had come at a premium, he said, without quantifying the additional cost at the vehicle level.
The comments came amid growing concerns that semiconductor manufacturers are prioritising higher-margin chips used in AI infrastructure over conventional automotive applications, potentially creating a prolonged supply squeeze for carmakers.
Mahindra & Mahindra (M&M) had flagged similar concerns during its March quarter 2025-26 (Q4FY26) earnings call in May, warning that growing demand for memory chips from AI applications could prolong supply constraints for automakers.
“That issue is not going to go away for a while because, as we all know, the memory chips are being driven into vast AI applications, and that is not going to slow down for some point of time,” said Rajesh Jejurikar, executive director and CEO (auto and farm sector), M&M.
Jejurikar had said the company was aggressively purchasing memory chips in the aftermarket to build inventories and safeguard production, despite higher procurement costs. He compared the situation with the chip shortages experienced during the Covid-19 pandemic, adding that M&M would have to continue building inventories even at a higher cost.
M&M had earlier indicated that the shortage was not restricted to electric vehicles (EVs), since memory chips are used in infotainment systems and other electronic components across both conventional and electric models.
E2W maker Ather Energy has also flagged persistent cost pressures. During its October earnings call, CEO Tarun Mehta said memory-chip prices had remained elevated despite earlier expectations of moderation.
“Unfortunately, memories continue to be really, really complicated and expensive, and we do not see any near-term solution to that,” Mehta said.
The concerns are also being echoed by global semiconductor manufacturers. At the Electronica trade fair in Munich on November 10, Nexperia interim CEO Stefan Tilger told Reuters that the Dutch chipmaker was “totally oversubscribed” as suppliers diverted manufacturing capacity towards AI data centres and away from conventional semiconductors used in automobiles and industrial equipment.
STMicroelectronics CEO Jean-Marc Chery also warned that semiconductor foundries and chip-packaging companies were increasingly shifting resources away from mainstream automotive and industrial applications, creating supply-chain bottlenecks.
Separately, automotive memory chips are facing significant price pressures as manufacturers prioritise higher-margin products used in AI infrastructure. According to S&P Global Mobility, prices under new automotive Dynamic Random Access Memory (DRAM) contracts could rise by 70-100 per cent in 2026 compared with 2025. The research firm expects supplies to remain constrained through 2027, although automakers willing to pay higher prices should generally be able to secure the volumes they require.
Counterpoint Research in an August report warned that shortages of Double Data Rate 4 (DDR4) and Low-Power Double Data Rate 4 (LPDDR4) memory chips used by automakers could persist beyond 2027. It said automakers were responding by entering into long-term supply agreements and shifting towards newer memory technologies such as DDR5.
The emerging supply pressures come amid strong vehicle demand in India, particularly in the electric segment. Federation of Automobile Dealers Associations (FADA) President Sai Giridhar had earlier cited shortages of specialised chips used in batteries and electronic systems as one of the factors affecting EV availability, with some customers facing waiting periods of up to eight months.
In its November 6 retail report, FADA said EV registrations had reached a record 3.55 lakh units in October, up 44.88 per cent year-on-year. However, Giridhar said demand had outstripped supply, with vehicle availability emerging as the principal constraint on further growth.
For automakers, the immediate challenge remains containing procurement costs while maintaining uninterrupted production. A prolonged shortage could add to existing margin pressures from steel, copper and other commodities, even as manufacturers attempt to secure supplies through higher inventories and alternative sourcing arrangements.
