Mahindra faces 25% production cut in September due to chip shortage

The global semiconductor crisis is now badly impacting vehicle production in India. Two days after passenger vehicle market leader Maruti Suzuki announced that its production from three plants is expected to be down by a massive 60% in September due to the chip shortage, Mahindra & Mahindra has confirmed that it too is impacted by the same problem.

In a regulatory filing, the company said: “The company’s Automotive Division continues to face supply shortages of semiconductors, which has got further accentuated due to Covid lockdowns in some parts of the world. Consequently the company will be observing ‘No Production Days’ of around 7 days in its automotive division plants in September 2021, which is estimated to result in reduction in production volumes by 20-25%. The revenue and profitability will be impacted in line with the fall in production volumes. The company is taking various cost optimisation measures to limit the impact.”

The company statement added, “There will be no material impact of the above event on the XUV7OO production ramp-up and launch plans. The date of commencement of bookings will be announced soon. The company’s tractor operations, exports, trucks and buses business and three-wheeler production are unaffected by the above disruption. As the situation is dynamic, the company is carefully reviewing the supply situation and all efforts are being made to minimise the impact."

Chip crisis increases waiting periods for popular models
The chip shortage is bad news for OEMs like M&M, which are currently riding a wave of demand for some of their popular models. In early August, the company had announced that it had nearly 90,000 bookings for five products – the Thar, XUV300, Scorpio, Bolero and the Bolero Pikup. Due to the supply chain issue of semiconductors, production has been impacted leading to substantial waiting periods.

As of early August, M&M had nearly 90,000 bookings for five products – the Thar, XUV300, Scorpio, Bolero and the Bolero Pikup.

While the Thar has a near-10-month waiting period and over 39,000 bookings, the XUV300 has over 10,000 bookings with a two-month waiting period. As of August, the Scorpio had over 6,000 bookings with a 45-day waiting period and the Bolero over 4,000 bookings. And the Bolero Pikup, which is seeing strong demand thanks to the boom in e-commerce and demand for last-mile deliveries, has seen over 30,000 bookings in the first quarter of FY2022.

India Auto Inc set to lose out on festive season sales
The continuing chip crisis comes at a most inopportune time for India Auto Inc, which was optimistic about recovering lost sales in the upcoming festive season which begins this month. Speaking to Autocar Professional recently, Vinkesh Gulati, president of the Federation of Automobile Dealers Associations of India (FADA), said the chips supply chain issue is expected to worsen with demand soaring during the festive season. “We are at the cusp of the festive season which is likely to give a boost. However, the supply chain is becoming a big problem in the PV segment.”

On an average, there is a waiting period between two and eight months across manufacturers for most popular models but it is diesel cars which have been the most impacted. “Manufacturers whose diesel presence is high are being affected more, but slowly and steadily, almost all manufacturers are in that lane,” said Gulati.