India’s Mahindra Warns Chip Crisis Will Hit Car Production

Indian automaker Mahindra and Mahindra Ltd said it expects a 20%-25% drop in its September vehicle production due to semiconductor shortages, following supply chain disruptions caused by the pandemic.

Mahindra said its revenue and profit will be impacted in line with the fall in production volumes, while its tractor, truck, bus and three-wheeler production was unaffected.

The company will have about seven “no production days” at its automotive division plants this month, the company said in a filing.

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Globally carmakers have been hit by chip shortages and have warned of further pain ahead due to stiff competition from the consumer electronics industry for semiconductor deliveries.

Earlier this week, Maruti Suzuki India, the country’s top carmaker, said it expected production at its plants in the states of Haryana and Gujarat to be affected in September too due to semiconductor shortages.

Indian automakers reported their August sales on Wednesday, with most of them seeing a recovery from a year earlier.

However, Mahindra’s passenger vehicle sales in August were down 24%, while Maruti sales fell 22.8% and Tata Motors’ sales were down 7.2% month-on-month.

PRODUCTION CURTAILED

Globally, Ford Motor Co, Honda Motor, General Motors and Volkswagen have all been caught off-guard by the prolonged global chip shortage, forcing many to idle or curtail production.

In July, Tata Motors warned it expected the chip supply crunch in the second quarter to be greater than the first.

Due to the shortages and rising prices, automakers have focused on manufacturing high margin models and have passed on some of the costs to customers. Maruti hiked prices four times this year, while Tata Motors and Mahindra have also increased prices.