Semi-Conductor Chip Shortage Impacts Mahindra's Inventory

When the semiconductor chip shortages first started disturbing the automobile industry in 2021, little did anyone predict its future outcome. It was only when the news about production lines and the repercussion it had on the waiting period for vehicles broke out, did the attention intensified. It has heavily affected the Indian automotive industry as well, as manufacturers are finding ways to cater to the long waiting periods on their products. Moreover, the lack of these essential chips has also resulted in a loss to the inventory, and as a result, Mahindra suffered a loss of more than 20,000 units in the third quarter of FY22.

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The homegrown carmaker revealed that the shortage of semi-conductor chips affected its production line, however, it does not see reducing its production capacity to offset the impact. In Q3 FY22, the company suffered a loss of over 20,000 units across its product range, as the shortage of essential electronic components haunts the carmaker among several others in the industry. However, the company is looking at new sources to balance its dependency on these chips.

The waiting period for the Mahindra XUV700 ranges between 6-9 months, depending on the variant.

Speaking on the semi-conductor chip shortage, Rajesh Jejurikar, Executive Director, Auto & Farm Sectors at Mahindra Group said, “The semiconductor chip shortage has affected not only us but the entire Indian car market. As a result, we've suffered a loss in inventory, and about 20,000 units are affected due to this. However, we have developed new sources to create fungibility on this front and have already started seeing its benefit. Not only that, but we've also created reserve stocks of critical components that can easily be sourced from the open market.”

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He added, “We are looking at suitable, substitutes for complex integrated circuits, and simplify them, making it easier for us to source them. Also, we've initiated alternate multi-sourcing of compounds. So, some of the actions we believe will yield results as we go forward into February. However, it will take time to scale these to volumes, but we believe, it will take us to a stronger quarter.”

The Mahindra Thar has more than 4,000 pre-bookings in Q3.

Mahindra also said that a shortage in these essential components will continue for the next 6-9 months and could impact its plan to launch new products. The recently launched Mahindra XUV700 registered more than 1 lakh bookings since its launch last year, however, around 70,000 units are yet to be delivered and are impacted by the semi-conductor chip shortage. The waiting period on the Mahindra XUV700 as well as the Mahindra Thar is expected to grow for as long as the next 6-9 months, depending on the variant. As a result, expect the next product from Mahindra to be launched by end of 2022.