Automotive Supply Chain Shifts To Defensive Inventory Models Amid Chip Shortages

India's automotive supply chain is undergoing a structural shift as manufacturers move away from traditional just-in-time inventory models. In response to persistent semiconductor shortages and geopolitical disruptions, companies are adopting a just-in-case approach, stocking critical components for three to six months. This transition was a key focus at the ET Edge SCM Fest 2026, where industry leaders discussed the challenges of competing for chip supply against the consumer electronics sector.

The global semiconductor landscape has been fundamentally altered by the AI boom, which has prioritized chip allocation toward consumer electronics due to higher margins and faster product cycles. Automotive manufacturers, consequently, face significant hurdles in securing long-term supply commitments. This supply-chain vulnerability has forced a rethink of manufacturing operations, with AI now being deployed for predictive maintenance to mitigate downtime and enhance operational efficiency for MSMEs within the ecosystem.

The shift toward defensive inventory management is expected to increase working capital requirements for automakers in the near term. However, the integration of AI-powered predictive maintenance is likely to yield long-term efficiency gains, helping manufacturers better manage equipment failures. Stakeholders should expect continued volatility in component availability as the industry navigates the ongoing competition for semiconductor resources throughout the remainder of the fiscal year.