In the wake of ongoing semiconductor shortages across the globe, which has been exacerbated by the ongoing lockdowns in several other parts of the world, automotive manufacturer Mahindra & Mahindra (M&M) said that it will observe ‘No Production Days’ of around 7 days. This announcement by Mahindra and Mahindra is expected to result in reduction which is estimated to result in reduction in production volumes by 20-25 per cent. This announcement is further going to impact the revenue and profitability of the company.
But Mahindra and Mahindra has made it clear that this decision of the company is not going to impact the sales of the company’s tractor and three wheeler business in any way. It is not only Mahindra and Mahindra who is getting badly impacted by the semiconductor shortages, on Tuesday Maruti Suzuki also said that it expects that its manufacturing plants can be impacted next month due to the protracted semiconductor shortages.
According to a latest report by Nomura, a spike in Covid-19 cases across the world, and patchy lockdowns in various parts of the world is posing a formidable challenge for the supply of chips and semiconductors. The situation becomes all more difficult as this comes at a time when (semiconductor) chip inventories are already running low across most sectors around the globe. Input shortages and low inventories, according to Nomura, will likely lead to production cuts and delayed shipments in the September 2021 quarter. Many analysts are of the opinion that chip shortages are expected to persist in Q2/Q3-FY22 and supplies are expected to improve in a staggered manner.
Due to the semiconductor shortage, M&M posted an overall sales of 30,585 units in August, a fall of 21.5 per cent over July. M&M’s passenger car sales too fell 24 per cent over July to 15,973 units in August. However, Maruti Suzuki India L total sales fell in August due to electronic components shortage. Sales fell 19.5 per cent month-on-month to 1,30,699 units in August, 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 too fell 24.5 per cent to 32,272 units. The impact of semiconductor shortage was equally visible on the sales of Tata Motors passenger vehicle division which sold 28,018 units in August, a 7.17 per cent fall over the preceding month. This happened mainly due to patchy lockdowns. In the statement, the company said that the ongoing chip shortage has forced the company to moderate production. Tata motors said the situation is fluid and the firm continues to mitigate the impact of the chip shortage.
As per many estimates, due to this ongoing semiconductor shortage, the global auto industry may produce 6.3-7.1 million fewer vehicles this year. And as per the IHS Markit report. automotive manufacturers will grapple with the difficulties till the second half of next year due to ongoing supply disruptions. In a report, IHS Markit said the chip crisis will not be over before the second quarter of next year.