Mahindra outlines plan to overcome chip shortage

Mahindra & Mahindra said it has worked out a strategy to manage the chip shortage that has dogged the OEM (and all others as well) and is now confident that its  faces no production glitch in Q4 of the current fiscal. The company's top leadership made these remarks  during a meeting to announce the company’s Q3 results.

The strategy included roping in another source for the IC which is a key part of the ECU, creating reserve stocks of ICs and also sourcing from the open market. The leadership emphasized the fact the impact of this policy is already being seen in February production, and that it is therefore, confident of a smooth quarter ahead.

While the above measures are short term, the company has outlined medium term measures which include finding suitable substitutes for complex multi-function ICs and looking into alternate, multiple sources for ICs.

In Q3, Mahindra & Mahindra faced a loss of 20,000 units due to the chip’s shortage but with all its products garnering good bookings, it is clear that the company hopes that the above measures will enable it to see a normal quarter on the production front for this fiscal.

For Q3 as a whole,  the company sold 118,174 vehicles units as against 121,133 units in the year-earlier period, down 2 percent. Tractor sales were down too by 9 percent to 91,769 units as against 100,696 units in the year-earlier quarter.

Focus on margins

In the quarter under review, the company’s leadership said it has focussed on margins and that would continue into the remining quarter. This has meant looking at material cost savings, fixed cost optimisation and selling price increases.

The company said that all its vehicles are seeing a volume upside, and that it is getting good booking numbers including for the XUV700, the Scorpio and Bolero. It has 70,000 open bookings alone for the XUV700, the company said even as it mentioned that other brands have received robust bookings including the Bolero family (7,000 bookings per month in Q3) XUV300 (with 7500 monthly bookings) Thar ( 4500 monthly bookings), and pick-ups (14,000 bookings per month).The company’s total open bookings are about 1,55,000 units.

Domestic tractor share up

On the farm equipment front, Mahindra’s leadership said that its market share for tractors in Q3 F22 was 39.4 percent, up 1.4 percent YOY. Its marketshare is down a bit from 41.8 percent in the first quarter of the ongoing fiscal. However, the outlook for the tractor segment as a whole is somewhat tepid with the sector expected to de-grow. With three consecutive good monsoons, the performance of the rains is an important factor going forward. The performance of the sector as a whole would be determined by the inter play of government support, the terms of trade for the farmers and the harvesting of the Rabi crops, said Hemant Sikka, who heads the FES. While the kharif crop was impacted by late rains, the sowing under the Rabi has gone up by one percent which is a positive development.

On other front, the company announced its AI-based app, DigiSense 4G which enables remote tracking of locations, usage and work performed. The company’s Krish-e Nidaan application also enables quick detection of pests and diseases and has 140,000 users. Mahindra’s FES division has also launched the Code, a versatile multi-purpose farm machine which has dual ground clearance and can be operated in both directions, and a host of other features. Targeted at horticulture farmers, the it has a variety of applications across weeding, harvesting and spraying. The company said the product would compete with power tillers, and is part of its strategy of “Transformed agriculture”.

Overseas tractor business

On the export front, the FES has much to cheer about. Its farm export volume was the highest ever in YTD December, up 77.4 percent. The company’s farm subsidiaries recorded their 6 consecutive quarter of Positive PBIT. Its global tractor businesses too has done well with billings up in the US and Brazil arms by 35 percent and 80 percent respectively for under 100 HP offerings. The company now plans to enter South Africa in this quarter. The company’s overseas export business in tractors outshone its domestic business.

In the three-wheeler electric domain, the company saw its highest ever quarterly billing, up 170.2 percent YOY. The company’s leadership said it will announce a more comprehensive policy for its electric business but for now stated that the XUV300 would have an electric avatar slated for the last quarter of the next discal.

All in all, it can be said that both divisions had a reasonably good quarter. Mahindra was able to end its association with SsangYong which is now a part of a Korean-led consortium, Edison Motors. The company has already gone on the record to state that it intends to sharpen its focus on SUVs. The company displayed its new Thar commercial at the Q3 results meet.