In the wake of the ongoing semiconductor shortage across the world, which has been exacerbated by the ongoing lockdown in many other parts of the world, automotive maker Mahindra & Mahindra (M&M) said it will observe ‘no production days’ of around 7 days . This announcement by Mahindra & Mahindra is expected to result in a reduction of 20-25 per cent in production. This announcement is going to have a further impact on the company’s revenue and profitability.
But Mahindra & Mahindra has made it clear that this decision of the company is not going to affect the sales of its tractor and three wheeler business in any way. It is not only Mahindra & Mahindra which is being badly hit by the semiconductor shortage, with Maruti Suzuki on Tuesday also saying it expects its manufacturing plants to be affected next month due to the long semiconductor shortage.
According to a latest report by Nomura, the spike in COVID-19 cases across the world, and patchy lockdowns in various parts of the world is posing a formidable challenge to the supply of chips and semiconductors. The situation becomes even more difficult as it comes at a time when (semiconductor) chip inventories are already running low in most regions around the world. According to Nomura, shortage of inputs and low inventory are likely to cut production and delay shipments in the September 2021 quarter. Many analysts expect chip shortages to persist in Q2/Q3 of FY22 and supply is expected to improve sharply.
Due to the semiconductor shortage, M&M recorded total sales of 30,585 units in August, down 21.5 per cent over July. Mahindra & Mahindra’s passenger car sales also fell 24 per cent to 15,973 units in August as compared to July. However, the overall sales of Maruti Suzuki India L fell in August due to shortage of electronic components. In August, sales fell 19.5 per cent month-on-month to 1,30,699 units, the company said in a statement. Sales Snapshot (MoM) Exports fell 2.8 per cent to 20,619 units. Mini and compact vehicle segment sales fell 26.5 per cent to 89,953 units. Utility vehicle sales also fell 24.5 per cent to 32,272 units. The impact of the semiconductor shortfall was equally visible on sales of Tata Motors’ passenger vehicle division, which sold 28,018 units in August, down 7.17 per cent over the previous month. This happened mainly because of the patchy lockdown. The company said in a statement that the ongoing shortage of the chip has forced the company to reduce production. Tata Motors said the situation is fluid and the firm is continuing to mitigate the impact of the chip shortage.
According to many estimates, due to this semiconductor shortage, the global auto industry could produce 6.3-7.1 million fewer vehicles this year. And according to the IHS Markit report. Automotive makers will face difficulties till the second half of next year due to supply disruptions. IHS Markit said in a report that the chip crisis will not end before the second quarter of next year.
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