Mahindra to further ramp up new Thar production, steel and semiconductor shortage a worry

Mahindra & Mahindra has chalked out plans to further ramp up production for the new Thar SUV, which was launched on October 2, 2020. Surging demand for the vehicle has seen cumulative bookings cross the 38,500 mark on February 1.

In January 2021, M&M received over 6,000 new bookings with around 45 percent demand coming for the automatic variants, and 25 percent customers opting for the petrol powertrain. The new Thar had received over 15,000 bookings in just 17 days after launch. In October itself, bookings had crossed the 20,000 mark extending the waiting period for the snazzy SUV to six months. 

On November 4, M&M announced its decision to increase the new Thar's production by over 50 percent, from 2,000 units a month to 3,000 by January. The SUV is witnessing a long waiting period for over nine months. 

The company claims to be witnessing “very healthy” demand for its UV models including the Thar, Bolero, Scorpio and XUV300. Speaking at a press conference yesterday, Rajesh Jejurikar, executive director, M&M, said, “We are prioritising production as per the current demand situation. So, while the Thar clearly is the topmost on the list, it is followed by the XUV300, Bolero and Scorpio.” “Typically, customers do not tend to wait when wait times are long, but that’s not the case with the Thar. We don’t see the demand going down anytime soon, we have a fairly robust order book for the next 4-6 months,” he added.

Shortage of steel, semiconductors impacts production
Even as India Auto Inc drives out of the slowdown and the passenger vehicle industry sees an uptick in sales, there continues to be a marked supply-demand mismatch. This is mainly a result of inadequate supplies of critical production material like steel and semiconductors.

Though M&M's UV business witnessed about 11 percent jump during the third quarter of FY2021 (YoY), production has been unable to match demand due to ECU and steel shortages. Consequently, there are chances of new product launches during Q1 FY2022 including the W601 (new XUV500) getting delayed despite “reasonable” levels of readiness.

On the supply side, shortage of semiconductors – a problem Indian OEMs and the automotive industry worldwide continues to face – was one of the key constraints that the company had to contend with in Q3 FY2021. This has also impacted availability of ECUs (electronic control unit) or the brain of the vehicle, due to a high dependence on a single supplier.

On February 5, Jejurikar had said: "Given the global nature of semiconductor (shortage) situation, it looks like it would spill over to Q2 CY2021. Rising raw material prices could probably push M&M to introduce another price hike in Q1 FY2022."

The company has also cited rising raw material prices to be another area of concern, not just for M&M but for the entire domestic auto industry.

Further, at the macro levels, the lower inventory in the domestic markets during Q3 FY2021 has also dented the dynamics of M&M's market share in certain markets. For instance, southern India states such as Tamil Nadu and Andhra Pradesh have slightly higher demand for higher horsepower. With shortage in inventory, M&M has been unable to tap the growing opportunities in the region. This has resultantly impacted company's wholesale figures in such markets. 

The key reasons for M&M in the past losing market share in UVs has been its inability to cash in on the strong demand for compact SUVs and crossovers subdued volume performance of its launches. Now, the  company's renewed focus on addressing product gaps and concentrating on its key SUV strength will enable it to gain new market share. 

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