India’s Mahindra and Mahindra flags persisting chip shortages as profit rises

The maker of the Scorpio, Thar and XUV range of SUVs benefited from robust demand for larger and pricier vehicles that made up more than half of India’s record passenger vehicle sales in fiscal 2023.

Chip shortages prevented the company from meeting its monthly SUV production target of 39,000 units, Rajesh Jejurikar, chief executive at Mahindra’s auto and farm sector, said in a press conference.

Still, demand for its SUVs stood strong, with more than 292,000 open bookings as of May 1.

The company said it raised the cash deployed for 2022-2024 capex for the auto business to 95 billion rupees from 79 billion rupees, in a bid to boost capacity and absorb regulatory costs.

Mahindra has no immediate plans of making cells for its electric vehicle batteries on its own and is still evaluating production through its Volkswagen tie-up, Jejurikar said. It currently gets batteries from a Korean supplier.

The automaker’s standalone profit after tax rose to 15.49 billion rupees ($187.45 million) in the January-March quarter, from 12.69 billion rupees a year earlier. It recorded a one-time charge of 5.12 billion rupees due to impairment provisions on long-term investments.

Mahindra said it expects a “low impact” to tractor sales from the El Nino weather phenomenon, citing strong water reservoir levels.

India’s state-run weather office had said earlier in the day that the country is likely to receive normal amount of monsoon rain in 2023 despite El Nino.