Covid-19: M&M says its an unprecedented crisis, at least a month’s biz could be lost


Mahindra & Mahindra’s Managing Director Pawan Goenka says that companies across the board will face a period of virtually no revenue but some level of fixed costs. This will drain the financials for everyone as nobody is spared during this unprecedented crisis. At least a month’s business could be lost, Goenka tells Ketan Thakkar in an interview. Goenka also takes questions on unsold BS IV stock, supply chain challenges many of its businesses located abroad such as Automobile Pininfarina, Ssangyong or Peugeot Motorcycles, which are all in the “affected zone”.

Edited Excerpts:


What is your view on the current environment?


Every one of us is giving the utmost priority to health, safety and welfare of our employees and communities. And, while there are business impacts, right now, that’s not what we are thinking about. We’re thinking about our employees and communities.

What is the anticipated business impact?

For anybody to say that it is going to be minor, I think it is obviously not.

First, there was supply issue from China in February and then it spread to other countries like Korea, Italy and also in India now, a lot of it is because of some parts coming from one of these countries into India. So, there was a supply constraint and now there is clearly a constraint in selling also because of the lockdown that has happened in many districts and shutters are down for many suppliers in many regions.

So, therefore, for a while until things comes back to normal, there will be very little production done. I’m not speaking for Mahindra, I’m speaking in general for the industry.

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We saw announcements of other car makers on Sunday and I think pretty much everything is shut down. Therefore, there will be a period of time when we’re not generating revenue and there will be some level of fixed expense that is incurred and that will drain the P&L for everyone. Nobody is spared.

How can you prepare for a comeback?

Two questions that one can ask is, first, how long will it take for industry to come back to normalcy and second, can this loss be recovered, once things come back to normal?

Nobody can give you any definitive answer today on what will be the situation tomorrow. It is a very fluid situation, what I would have said yesterday is not true today. And what I’m saying today by the time this goes to print, it may not remain the same tomorrow. Therefore, it’s very difficult to say how long this is going to last. We know for sure 31st March right now is what the government is saying; let’s wait till 31st March.

I should also say that Mahindra fully supports the steps that have been taken by the government and lots of our employees are working from home.

These are unusual times and we need to conserve cash and we are looking at multiple ways of dealing with it.

One really does not know when things would come to normal. But going by the experience of China, Korea and other markets, at least a month of business is likely to be disrupted.

All that we can do from our end, is to be ready on our toes, as the situation starts getting back to normal, our ecosystem should be ready to get back to normal functioning.

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You have a unique challenge of unsold BS IV stock, how do you deal with it?

As of Sunday, Mahindra had very little BS IV stock – of about 3500 units across segments including commercial vehicles. In a normal environment, this BS IV stock would have been easily sold before the deadline of March 31st, but given the fact that showrooms are shutting down across the country, we obviously see a challenge.

FADA (Federation of Automobile Dealers Association) has already put forward a plea to the Supreme Court and we are hopeful that the Supreme Court will be considerate in its judgment and allow us to sell this unsold stock when the situation gets back to normal.

How insulated are the international operations

Yes, many of our businesses, Automobile Pininfarina, Ssangyong or Peugeot Motorcycles, all are in the affected zone. The APF product is still in the development stage and, therefore, the impact is minimal. At Ssangyong, we saw an impact of 25-30% in domestic sales in February, which we hope will recover soon, as Korea comes back to normal. Interestingly the exports of Ssangyong in both months stuck to the plan. As for Peugeot Motorcycles, which has a plant in China, it was disrupted by the local virus impact and many of its international markets too are in a lockdown mode; so the business of Peugeot Motorcycles will be affected.

What are the supply chain challenges in Europe and China?

China has almost come back to normal. Most of the factories are operating at good levels. Supply Chain is getting back to normal. As for Europe, we don’t have major dependence on the region from the supply chain perspective, barring a few tier II and tier III suppliers.

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The BS IV production has already been completed, but surely there will be some impact in the ramp up of BS VI. Beyond the global supply challenges, the biggest factor for us is to see how soon the domestic supply chain comes back to normalcy.

What has been the impact on the tractor business?

There was no impact on tractor demand so far until about three to four days ago. But now, the repercussions of are felt all over the country, including our tractor buyers.





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