Demand for cars, according to Mahindra & Mahindra Ltd., is exceeding supply

According to Mahindra & Mahindra Ltd., sales of the popular sport-utility vehicles (SUVs) are outpacing the company’s production capacity, driving profitability.

With sales of its vehicles surging to 149,803, up 74 percent from a year ago, and open reservations for more than 273,000 vehicles, the carmaker reported a dramatic increase in first-quarter net profit.

“We have kicked off capacity expansion programs but had not anticipated this kind of demand,” Rajesh Jejurikar, executive director at the Mumbai-headquartered company said.

“We are ramping up capacity to make sure we can leverage all the demand we have,” he added.

Demand for cars, according to Mahindra & Mahindra Ltd., is exceeding supply

Within half an hour of opening its operations, Mahindra claimed to have received more than 100,000 orders for its Scorpio-N SUV, which had a sales value of almost 180 billion rupees ($2.3 billion). Approximately 6,000 of these vehicles may presently be produced there each month, according to Jejurikar.

Despite the robust demand for automobiles, Indian automakers, notably Mahindra, claims to be observing an improvement in the semiconductor shortages that have plagued the sector since the outbreak. Mahindra was severely impacted by chip storage last year, which reduced supplies of its vehicles.

According to Jejurikar, the company sources its chips from several different countries, and the geopolitical situation in Taiwan hasn’t yet shown any early signs of disrupting supply.

For the three months that concluded on June 30, the company posted a combined net profit of 21.96 billion rupees, up from 4.24 billion the previous year. Operating revenue increased by 48 percent during the quarter to 284.12 billion rupees.

However, its operating margin shrunk by 200 basis points to 11.9 percent.

Mahindra’s stock price decreased by 2% at day’s end.