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As chip shortage eases, M&M gears up for capacity expansion

Attributes long wait periods of 20-24 months to unprecedented demand. Says, doesn't have high dependence on Taiwan from a single-source standpoint.

August 07, 2022 / 07:31 PM IST

Mahindra & Mahindra 's (M&M) top brass, during a media interaction, affirmed that the “semiconductor crisis is now abated” and the prolonged waiting period for vehicles is largely due to "unprecedented demand".  They also maintained that the process of capacity addition involves lengthy lead times and the company is now looking to significantly ramp up production to cater to the burgeoning demand for its bestselling vehicles, XUV700, Thar, and the recently-launched Scorpio-N.

Nearly Rs 10,000 crore was earmarked by the Mumbai-based SUV and tractor major for the next two financial years to ramp up its capacity across various facilities in order to align its production with market demand.

“The wait time is being driven largely by the demand we have seen. Capacity will take some time to ramp up, and that is what is causing some wait times right now. So, while the semiconductor issue is abated, it is demand that is driving the wait. And we just have to get the capacity in place to continue addressing that. However, we’re not seeing any reduction in demand at this point in time,” Anish Shah, Managing Director & CEO, M&M, told reporters at a post-results press conference.

He added, “We don't have a very high dependence on Taiwan from a single-source standpoint."

The assertion comes at a time when M&M is saddled with nearly 1.4 lakh bookings for its XUV300, XUV700, Thar, Bolero (including Neo), and Scorpio. For some models like XUV700, and Thar the waiting period is up to 20-24 months. Adding further to its existing waitlist is the Scorpio-N, which garnered one lakh bookings in 30 minutes.

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“The semiconductor crisis is by and large behind us, though there are disruptions happening because of the China lockdown from time to time. Global logistics has been a challenge. When we look at that, we have some issues impacting the short term. We are making all the investments to ramp up our capacity and that should start coming into play,” said Rajesh Jejurikar, Executive Director, Automotive and Farm Equipment Sector, M&M.

Talking about its expansion plans, Jejurikar stated, “We have put out what our capex requirement is. We have revised that upward in the last quarter to take care of capacity expansion in view of the increased demand. That increased demand will take a few months to kick in, though there will be some improvement in availability (of vehicles to customers). So at the moment, we are very close to our existing capacity of key models like the XUV 700 and Thar, which will be going up soon; Scorpio-N will bring in new volumes. There will be an upside as that is a separate capacity (for Scorpio-N) on top of what we have right now.”

When asked about the projected output, he maintained, “We won’t be able to share specifically what is going to be the capacity because, in a way, that will give a guidance on our volumes which we don’t normally do for the future. But clearly, we are ramping up to make sure we are going to leverage upon.”

M&M reported a 67 percent year-on-year (YoY) surge in Q1 FY2023 net profit to Rs 1,430 crore. The company reported a 67 percent YoY rise in revenue from operations to Rs 19,612.6 crore, which was in line with Street expectations.
Avishek Banerjee
first published: Aug 5, 2022 09:31 pm
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