Mahindra & Mahindra announced on Thursday that there will be a 20-25 per cent dip in production volumes of its automotive division in September as it faces shortages of semiconductors.

Consequently, Mahindra will shut its plants for seven days this month. The company said revenues and profits will be impacted in line with the fall in production volumes.

Earlier this week, Maruti Suzuki said it will cut back production by 60 per cent because of the chip shortage.

Malaysia’s Covid surge

The chip shortage has been plaguing auto manufacturers globally for almost a year due to Covid-induced supply chain disruptions, and the situation has worsened for OEMs in India because of  the Covid surge in Malaysia.

The country is seeing its worst surge since the start of the pandemic, and nationwide lockdowns from June 1 have left  chip manufacturing units facing acute labour shortage.

Festival demand hit

Experts expect the situation to improve only in the second half of this fiscal year. OEMs, including Tata Motors and Maruti Suzuki, have warned that the chip shortage can dampen demand recovery during the festival season ahead. Dealers have also warned of a 30 per cent sales dip during the festival season.

However, according to Mahindra, there will be no material impact on the new XUV700 production, ramp-up and launch plans.  The company does see any major impact on its tractor, truck and bus segments or three-wheeler production. “As the situation is dynamic, Mahindra is carefully reviewing the supply situation and all efforts are being made to minimise the impact,” it said.