Coronavirus impact: M&M expects Q1 volumes to decline 15%-20% q-o-q

Mahindra and Mahindra has guided for a weak first quarter volume due to Covid-19 disruptions. The company is reviewing the demand and supply situation and re-calibrating its operations, it said in a stock exchange notification. So far, Mahindra is the only auto firm to give a quarterly guidance on volumes due to the pandemic’s second wave.  

“With the rampant spread of the second wave of Covid-19 and lockdowns enforced in various states and parts of the country coupled with disruption in the supply of oxygen for industrial use, demand and supply for vehicles and tractors is expected to be impacted temporarily," the company said. 

As a result, it estimates sales volume for the quarter ending June, 2021 to be lower by 15 per cent-20 per cent as compared to Q4F21. "The revenue and profitability will be impacted in line with the fall in volumes mentioned above. However, the company is taking various cost optimization measures to limit the adverse impact," M&M said.

Meanwhile, global shortage of micro-processors (semiconductors) used in Electronic Control Unit (ECUs) fitted in different components / aggregates for vehicles also has been weighing on production and continues to pose challenges to the smooth production schedules, it said.

Earlier this month, the maker of XUV5OO and Scorpio models announced a temporary halt of operations at its plants. On Wednesday, Royal Enfield said the company’s manufacturing operations across its four facilities will remain suspended between May 13 to May 16 and it will undertake maintenance activity at its manufacturing plants during this time.

Several other automakers, including Maruti Suzuki India, Hero MotoCorp, Toyota, and Honda Motorcycle & Scooter India have announced partial closure of up to 15 days and some have even extended it due to pandemic-induced disruptions.

“In view of this, the Company is carefully reviewing the demand and supply situation and re-calibrating its operations accordingly while protecting the interest of its customers, dealers and suppliers," said M&M.

The endeavour is to ensure optimal level of inventory at plants and dealerships in order to be prepared for a rebound in demand once the situation returns to normalcy, it added. Mahindra will report its earnings for the March quarter on May 25.

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