Mahindra & Mahindra, a leading manufacturer of domestic automobiles and farm equipment, increased its June quarter net profit by 67 percent year over year (YoY) to ₹1,430 crore.
M&M, like its domestic competitors, plans to dramatically increase production to meet the rising demand for passenger cars. However, the business said that the capacity addition process, which entails lengthy lead times, is what is preventing demand growth rather than the semi-conductor problem.
“We’ve got all our investments going to add capacity but there are lead times to get things up and running,” said Rajesh Jejurikar, executive director, automotive and farm equipment sector, M&M.
Jejurikar emphasised that the company’s worst chip supply problems are now behind them. According to M&M, there is no imminent threat from the tensions caused by China’s onslaught against Taiwan, the largest contract manufacturer of semiconductor chips in the world.
“We have no early signals that we’ll have a disruption coming from Taiwan, but we will have to wait and watch,” Jejurikar added.
“Many of the chips for the auto industry also come from several other places. We obtain a lot of our supplies from a large plant in Malaysia, and there are semi-conductor plants in other nations as well, so we don’t rely heavily on Taiwain, according to Anish Shah, managing director and CEO of M&M.
With a record 75,400 sports utility vehicles (SUVs) and 1,12,300 tractors sold during the three months to June, Mahindra & Mahindra reported its biggest domestic sales volumes ever in the automotive and agricultural equipment divisions, generating a revenue increase of 67 percent YoY to ₹19,613 crore. The lowering of commodity prices, which the business claims should be reflected in the results for the current quarter, however, caused the company to announce weaker than anticipated margins of 11.9 percent.