Mahindra & Mahindra may see its sport utility vehicle (SUV) production decline by as much as 15 percent in June due to labour shortages affecting some of its critical suppliers, according to a report by The Economic Times citing industry sources.

The disruption is reportedly linked to a major vendor experiencing a 20-25 percent shortfall in supplies because of a shortage of contract workers. The supply constraints are impacting production of popular Mahindra models, including the XUV 7XO and Thar.

Mahindra currently has an installed production capacity of approximately 57,000 petrol and diesel vehicles per month. The production challenge comes at a time when the company continues to witness strong demand across its SUV portfolio.

Industry executives indicated that the issue reflects a broader labour shortage across manufacturing hubs in western India. Rising minimum wages in states such as Haryana and Uttar Pradesh, combined with welfare programmes and self-employment opportunities, have reduced the migration of workers to industrial centres in Maharashtra.

Rajesh Soni, Chief Executive Officer of Neolite ZKW Lightings, noted that labour shortages have evolved into a nationwide manufacturing challenge rather than being confined to Maharashtra. Companies are increasingly adopting automation and employee retention initiatives to mitigate the impact.

Sudhir Mehta, Founder and Chairman of EKA Mobility, said automotive clusters around Pune and Aurangabad are facing a mismatch between labour demand and supply, creating shortages of semi-skilled and unskilled workers required for welding, assembly, and shop-floor operations.

According to the report, at least one major auto component supplier transferred contract workers from northern India to its Chakan facility near Pune to sustain production levels. Industry participants attribute the trend partly to higher wage levels in workers' home states, reducing incentives to migrate.

The labour shortage is also affecting sectors beyond automobiles. Industry representatives involved in consultations with the Reserve Bank of India indicated that lower migrant worker participation in urban centres has affected demand for affordable housing.

The development comes despite robust demand for Mahindra's SUV lineup. The company's SUV sales reportedly exceeded 660,000 units in FY25, registering growth of around 19 percent, with positive momentum continuing during April and May.