M&M Says Chip Shortage To Lower September Output By Up To 25%
M&M says it is carefully reviewing the supply situation and all efforts are being made to minimise the impact.
After Maruti Suzuki India Ltd., Mahindra & Mahindra Ltd. said it would cut production in September because of the worsening global chip shortage.
M&M will observe around seven ‘no production days’ in its automotive division plants in September, which could lower its output for the month by 20-25%, according to its exchange filing.
The company, however, is taking several cost optimisation measures to minimise the impact due to the production cut.
As the situation is dynamic, the company is carefully reviewing the supply situation and all efforts are being made to minimise the impact.M&M's Exchange Filing
The disruption will not impact the company’s tractor operations, exports, trucks and buses business, and three-wheeler production, M&M said in the filing. It also clarified that the production cut will have no material impact on the XUV700 production ramp-up and launch plans.
M&M, one of the worst-hit automakers due to the semiconductor crunch, last month had said the situation was uncertain and needs to be watched carefully. It had indicated at evaluating the need for production days off on account of the crisis. Already the wholesale dispatches of M&M’s car division fell 24% over the preceding month in August.
The shortage of chips began in December last year as sale of laptops and mobile phones to televisions surged with people working remotely during the pandemic. Now rising Covid-19 cases in key supplier markets such as Malaysia deepened the woes. Lack of semiconductors—crucial for sensors, engine, battery controllers and infotainment units in vehicles—hurt Indian automakers’ ability to keep up with the demand for personal mobility arising from fears of contracting the virus.
Shares of M&M fell as much as 1.5% in early trade on Thursday to Rs 758 apiece before paring losses. Of the 41 analysts tracking the company, 36 have a ‘buy’ and five recommend a ‘sell’, according to Bloomberg data. The overall 12-month consensus price target implies an upside of 24.1%.