M&M Says Supply Shortage Of Semiconductors To Hurt Production
An employee assembles an engine at the Mahindra & Mahindra Ltd. facility in Chakan, Maharashtra, India. Photographer: Udit Kulshrestha/Bloomberg

M&M Says Supply Shortage Of Semiconductors To Hurt Production

Mahindra & Mahindra Ltd. said the global shortage of semiconductors supplied by Bosch Ltd. is expected to lower production and sales for the maker of cars, trucks and tractors in the last quarter of the ongoing financial year.

“The company is engaging closely with Bosch and assessing likely production loss for the last quarter of FY 2020-2021 on account of this supply disruption as also steps to be taken to minimise the impact of the same,” M&M said in an exchange filing.

The company, however, said the estimation of likely reduction in production or sales volumes of the automotive division for the last quarter is not available. Also, there will be no material impact on production or sales volumes of its automotive division in December. The company’s tractor operation and three-wheeler production, too, will remain unaffected with the disruption.

This comes a day after Bosch said it’s facing severe shortage of semiconductors, curbing its ability to deliver to the automotive market demand in India. BloombergQuint, in late November, had first highlighted that M&M was facing prolonged supply chain issues.

Bosch, a key supplier to most domestic automakers, had said the steep escalation of demand in consumer electronics industry driven by safety and hygiene sentiments, coupled with the rise of 5G connectivity, led to a surge in global demand of semiconductors.

The shortage in supply of critical parts comes when Indian automakers are witnessing a nascent recovery from the disruption caused by the coronavirus pandemic. While sales had slowed even before the virus outbreak, the world’s biggest lockdown to curb it had completely stalled production and led to a washout in the initial months. Demand slowly picked up from June after the curbs were lifted.

Over August, September, October—the months in which India’s auto industry saw the first signs of a post-lockdown recovery—larger peers such as Maruti Suzuki India Ltd. and Hyundai Motor Corp. dispatched more units than the year earlier. But at M&M, shipments were almost flat. Just before the festive demand picked up, while factory-gate shipments for Maruti Suzuki and Hyundai rose 15% and 12%, M&M’s increased by just 1%.

Shares of M&M fell as much as 2.6%—the most since Oct. 26, 2020, to Rs 735.25 apiece. The stock has snapped a four-day gaining streak.

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