Mahindra to cut production due to chip shortage

Mahindra will reduce September production volume by 20-25 percent; XUV700 production, launch plans remain unaffected.

Published On Sep 03, 2021 01:22:00 PM

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Mahindra to cut production due to chip shortage

The global semiconductor crisis has intensified just ahead of the festive season in India, and had severely hampered vehicle production in August 2021. The crisis is going to continue well into September, as Maruti Suzuki recently announced a massive 60 percent cut in production due to chip shortage. And now, Mahindra has announced a similar measure, as they too have been impacted by the semiconductor crisis.

September production cut by 20-25 percent
XUV700 production, launch plans unaffected
Thar's waiting period goes up to 10 months

Mahindra to cut production in September

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 percent. 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.”

However, Mahindra has not let the semiconductor crisis come in the way of its upcoming flagship XUV700, the production and launch plans of which remain on schedule. Mahindra will soon be announcing the starting date for bookings as well. Mahindra’s commercial vehicle production and tractor operations also remain unaffected by the crisis.

Current waiting period of Mahindra SUVs

Mahindra has recently been riding a wave of demand for some of its models, which is why the chip crisis has led to exaggerated waiting periods. In early August, the company announced that it had nearly 90,000 bookings for five products – the Thar, XUV300, Scorpio, Bolero and the Bolero Pik-Up.

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. The Bolero Pik-Up, which is seeing strong demand due to the boom in e-commerce and demand for last-mile deliveries, has seen over 30,000 bookings in the first quarter of FY2022.

Auto industry to lose out on festive season sales

The continuing chip crisis comes at a most inopportune time for the Indian auto industry, which was optimistic about recovering lost sales in the upcoming festive season that 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.

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