M&M expects chip crunch going forward, pandemic to hurt first quarter

Indian automaker Mahindra and Mahindra warned on Friday that a global chip shortage, rising commodity prices and pandemic-related lockdowns in its home market posed a threat to its business in the first quarter of fiscal 2022.

Apart from the chip shortage triggered by factors including pandemic-driven supply-chain disruptions, the Indian auto industry is under pressure from a severe second wave of Covid-19 infections that have led to a fresh round of lockdowns.

However, Mahindra said it expected demand to rebound in June and July as states came out of lockdowns, after reporting a profit after tax of 484.4 million rupees ($6.69 million) for the fourth quarter ended March.

"We are ramping up production and we believe there will be a strong demand rebound as we get out of lockdowns between June-July," Executive Director Rajesh Jejurikar said, adding that the auto sector could take a month or two longer.

The company, chaired by billionaire Anand Mahindra, has not seen any cancellations in bookings despite a large number of people waiting for their orders, Jejurikar said.

On Friday, Mahindra said revenue from the auto sector rose 43% in the March quarter despite supply constraints.

For the same period last year, it logged a loss of 25.02 billion rupees when it took a charge related to its South Korean unit SsangYong Motor Co Ltd.

Mahindra has been reviewing its business to retain only those that make money or can be profitable, and as part of that it took a one-time hit in 2020.

On a consolidated basis, Mahindra booked a one-time loss of 4.85 billion rupees during the March 2021 quarter due to discontinuation of operations at SsangYong Motor.

Mahindra also said it was targeting capital expenditure of 120 billion rupees over the next three years and planning to launch nine new vehicles by 2026, including electric vehicles.