Where Did All The Chips Go?

Cuts, Cuts, And More Production Cuts

Maruti Suzuki warned of more production cuts this month. India’s largest carmaker estimates volumes to drop a whopping 40% in October. This will be the 3rd straight month of lower production for Maruti. Psych! 🤯

The ongoing semiconductor shortage is here to stay despite earlier reports of easing supply constraints. But more than the shortage itself, the timing is a bummer. The 45-day festive season starts on October 7. Typically, festive season (a 45 day period) sales make up nearly a third of total auto sales. 📊

Auto dealers are already working with limited inventory after the 2nd Covid wave. On the other hand, customers are eager to splash their Covid savings on big cars. Also, low-interest rates and preference for personal vehicles are boosting demand. ✅

With waiting periods as high as six months, buyers are moving to a quicker and cheaper alternative – used cars. 🚘 Second-hand vehicle demand is shooting through the roof. Major markets like Maharashtra, Karnataka, and Delhi-NCR are seeing rapid growth. Recently listed CarTrade Tech, a leading online marketplace for used automobiles, will gain big time from this. No wonder the stock jumped +4% today. 📈 

As they say, “one man’s loss is another man’s gain”. 

While we’re on the topic, September auto sales figures were released today. Strong rural demand boosted tractor sales. Passenger cars continue to disappoint. Bajaj Auto and TVS Motor reported better than expected sales. Commercial vehicles did alright. 👍

Pullin’ In Dough

Ola electric raised $200 million in the latest funding round led by Falcon Edge and SoftBank. The new deal values the company at $3 billion. 🤑

Bhavish Aggarwal, Chairman, and Group CEO at Ola said:
We’re proud to lead the EV revolution from India to the world. India has the talent and the capability to build technologies of the future for the industries of the future for the entire world. I thank our existing investors and welcome new ones to Ola. Together, we will bring mobility to a billion and sustainability to the future.

The big-money move comes as no surprise after the company successfully launched its S1 and S1 Pro electric scooters. The company claims to have sold Rs 1,100 cr worth of scooters in just two days. 👏 

Ola plans to use the funds to develop other vehicle platforms. This includes electric motorbikes, mass-market scooters, and its very own electric car. Watch out Tesla, you’ve got competition. 😎

Ola is bullish on India’s EV revolution. In a matter of a few months, Ola set up its 500-acre FutureFactory in Tamil Nadu. The state-of-the-art factory, run entirely by women, has a manufacturing capacity of up to 1 cr scooters per annum. 👨‍🏭 Ola will also invest $2 billion over the next five years to scale up its charging infrastructure. 

The Indian electric-two-wheeler industry is still at a very nascent stage. Low ownership and strong demand offer a long runway of growth. All the best Ola. Can’t wait for the IPO now. ✌

Crypto 101

Last month, The Reserve Bank of India (RBI) announced that it may start trials of a “Digital Rupee” soon. In today’s class, we’ll learn what are CBDCs? And what are its advantages and disadvantages? 

Central bank digital currencies (CBDCs) are simply the digital version of a country’s paper currency. According to The International Monetary Fund (IMF), CBDCs must fulfill three criteria:

• A digital version of the currency,
• Issued by a country’s central bank, and
• A legal tender of the country 

Use case: Central banks want to issue CBDCs to simplify and promote financial inclusion. In Vietnam, for example, nearly 69% of the population doesn’t have access to banks. However, 73% have internet access — one of the highest in the Asia-Pacific region. In this case, CBDCs could help bring more people into the banking system, promote the flow of credit, and spur growth. 

As of August 2021, 81 countries are working on the issuance of CBDCs. However, implementation will differ from country to country. 

China’s CBDC, the digital yuan, has been used in +70 million transactions, amounting to 34.5 billion yuan ($5 billion) as of June 2021. The country will formally roll out the digital yuan during the Beijing 2022 Winter Olympics in February 2022. 

The main disadvantage of CBDCs is that they aren’t decentralized like Bitcoin or Ethereum. Since they are issued by central banks, governments maintain authority over the currency and limit privacy.

Movers and Shakers

Here’s a look at this week’s top movers. Triveni Turbine took the pole position after rallying +29%. 🥇IDBI Bank (+28%) posted its highest weekly gain since June 2020. CAMS (-12%) dropped for a fourth straight week. 📉 Bajaj Electricals (-11%) posted its worst weekly loss in over a year. Check out their charts below: