Mahindra and Mahindra is witnessing decreased demand for its entry-level XUV models, primarily due to supply chain disruptions. The drop in demand is particularly noticeable in the subcompact SUV segment, including the XUV300 and XUV400 models.
Between April and June of this year, Mahindra and Mahindra has experienced a decline in demand for its sports utility vehicles. The company shared this information with investors in Boston, revealing that monthly bookings have fallen from 57,000 between February and April to 48,000.
This drop in demand is most evident in the subcompact SUV sector, affecting both the XUV300 and XUV400 models. Even the highly sought-after Thar model has seen a reduction in bookings.
Out of the total 9,000 units reduction per month, the XUV300 and XUV400 account for around 4,000 units, while the Thar contributes to another 4,000 units decline. The remaining decrease of 1,000 units comes from reduced bookings for the basic utility vehicle, Bolero.
In contrast, demand for the Scorpio-N and XUV700 models remains stable, with no significant changes in monthly bookings. The Scorpio boasts a demand of 14,000 units, while the XUV700 maintains a demand of 9,000 units, signifying a consistent demand pattern for these models.
However, a different trend is observed in the compact and subcompact SUV range, which includes the XUV300 and XUV400. Monthly bookings for this range have declined by 6,000 units in Q1 FY2024 compared to the period of February-April 2023. Similarly, the iconic Thar SUV has faced a decrease in monthly bookings, dropping from 14,000 units in Feb-April 2023 to 10,000 units in FY2024.
The popular SUV model Bolero has also experienced a drop in new orders, declining to 9,000 units per month in FY2024 from 10,000 units in Feb-April 2023. These changes have led to an overall decrease in the company’s bookings, going from 2.9 lakhs in February-April 2023 to 2.8 lakhs in Q1FY2024.
These challenges stem from supply chain disruptions, particularly those related to semiconductor chips. These chips are essential for various vehicle functions, ranging from infotainment to critical engine management tasks.
The global semiconductor chip shortage, originating from the Covid-19 pandemic in 2020, has impacted production capacities and resulted in manufacturing halts for numerous automakers.
Despite these hurdles, Mahindra and Mahindra has managed to increase its production capacity from 29,000 units in March 2022 to 39,000 units by March of the current year, thanks to improved semiconductor supply and factory enhancements. Nevertheless, the company has faced supply shortages once again during the April-June period, resulting in an average monthly wholesale figure of 33,000 units.
In its presentation, the company attributed a volume impact of 5,000 SUVs and 2,000 Pik-Ups in Q1FY2024 to a temporary disruption in engine-related parts and semiconductor supply constraints from suppliers.
Fortunately, the supply situation has improved since then, with the company reporting sales of 37,500 units in July 2023. On a positive note, the company expressed confidence in achieving its Q4FY2024 exit capacity estimates of 49,000 units.