China losing its edge an opportunity for India: Anand Mahindra

Anand Mahindra: “Unshackling ourselves from China is a good development for the rest of the world and long overdue. Nature abhors a vacuum, and other countries, including ours, will rush to fill it.”

The global semiconductor supply chain disruption, which began over two years ago and continues to impact the automotive industry adversely in the form of slowed-down production and growing vehicle waiting periods, saw mention in Mahindra Group Chairman Anand Mahindra’s speech at the virtual 76^th annual general meeting held on July 5. Although the chip crisis has largely abated, the automotive industry ecosystem is now aggressively rethinking the path ahead for seamless semiconductor supplies.

Mahindra & Mahindra is among the many OEMs across vehicle segments impacted by the supply chain disruption and the company, which is riding a surging wave of demand for SUVs in India, currently has outstanding vehicle bookings of over 273,000 units including 79,000 for the XUV700, 100,000 for Scorpio N, 25,000 for the Thar, 15,000 for the Bolero including the Bolero Neo, 13,000 for the XUV300 and 7,000 units for the regular Scorpio. M&M remains the leader in SUV revenue market share at 17.1%.

Unshackling from China
In his speech, Mr Anand Mahindra said: “Another area where businesses everywhere are feeling the pain is in supply chain disruption. In M&M, one of the main reasons for the long waiting periods for delivery of vehicles is that the availability of semiconductors had slowed down to a trickle. Those lamenting the demise of a global supply network are ignoring the fact that the disruption is in the China-dominated global supply network rather than the true global supply chain.”

“Unshackling ourselves from China is a good development for the rest of the world and long overdue. Nature abhors a vacuum, and other countries, including ours, will rush to fill it. In fact, the process of unshackling has already begun. China may be losing its edge: 60% of companies and 82% of manufacturers now report their production slowed during the present outbreak due to lack of employees, inability to obtain supplies, or explicit factory halts resulting from the lockdowns. So, where is the opportunity in this scenario?”

“There is likely to be significant supply chain restructuring. Companies and countries will look for alternate supply sources. This will create pockets of opportunity around the world. There is likely to be a significant supply chain restructuring, and India may well be one of the beneficiaries of this ‘sourcing’ diversification. The supply chain disruption experience will also boost another burgeoning business. All of us have learned the hard way that it is crucial to keep monitoring the supply chain situation, to keep a finger on the pulse and to get early warning signals of possible disruptions. This points to the need for greater digitisation and reliable monitoring software, including perhaps, blockchain. Another Opportunity. Another area of brightness that completely eclipses the sobriety is leisure and recreation.”

“After two years of Covid, the whole world is realising that You Only Live Once. There is an unprecedented frenzy to do all the things we have been postponing. I could throw a hundred statistics at you, but the pictures we have been seeing every day of holiday crowds say it all. Our own Club Mahindra has seen occupancy levels go from strength to strength despite new variants. The leisure and recreation boom has begun. CHINA’S LOSS IS INDIA’S GAIN. We are going to be the beneficiaries of a geopolitical realignment in threat perception. For the last few decades, all roads led to China. But there has been a change in the situation. China’s geopolitical ambitions and growing economic dominance are spooking the West.”

“The US Foreign Secretary Antony Blinken made a speech recently where he called China “the most serious long-term challenge to international order” and proposed, among other things, “to align with partners with shared interests who are opposed to China’s overseas development policies.” That is India’s cue. We can be the balance against China. We can be the new player in the supply chain. The situation is rife with opportunities. We have but to seize the day. As global interest in supporting an economically strong India grows, I am confident that Capital will flow here from the West. This investment will be via FDI, thus directly putting money into Indian businesses and infrastructure. PE and VC capital, in particular, will see strong growth, as it already has started showing.”

“The move to restructuring global supply chains will also benefit India. India will be the top candidate in the sourcing diversification process. Given the right conditions, Indian manufacturing could take off.”

“I believe industry should have faith in the future and invest. The world is changing, and there are opportunities waiting to be seized. We seize these opportunities and turn our fortunes around. A little bit of calculated risk, a little bit of courage will pay rich dividends. To quote FDR, we have nothing to fear but fear itself.”