Companies
Can bring in a hybrid in a 'reasonable' time frame if market demands: M&M
Summary
- Recently, a UP government directive to implement a 100% road-tax waiver on hybrid vehicles has revived interest in the technology, offered in India by OEMs such as Toyota Kirloskar Motor and Maruti Suzuki.
Automotive major Mahindra & Mahindra (M&M) can get a hybrid sports utility vehicle (SUV) to market in a reasonable time-frame, and also expects good pick-up in demand for its upcoming range of electric vehicles (EVs), the company's top official said on Wednesday.
“If there is a very strong consumer demand for hybrids or other powertrains, we can get that at a reasonable timeframe as well," group chief executive and managing director of M&M, Anish Shah said in the company's earnings press conference, adding that in terms of pick-up for the EV segment, “we feel pretty good that with the product set that's coming out, we will be very favorably positioned".
Shah was responding to Mint's question on whether the company will focus on diversifying its powertrain mix away from diesel-powered vehicles to better comply with the upcoming fuel efficiency norms. M&M derives a majority of its sales from diesel-powered variants of its SUVs like XUV700, Scorpio-N and Thar.
Recently, a UP government directive to implement a 100% road-tax waiver on hybrid vehicles has revived interest in the technology, offered in India by OEMs such as Toyota Kirloskar Motor and Maruti Suzuki.
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Shah's comments come in the backdrop of rival Tata Motors choosing to stay away from hybrids, even as sales of EVs moderate and hybrids gain more popularity as a more practical, fuel-efficient alternative to EVs and traditional IC-engine variants.
Q1 performance
The company on Wednesday reported a 20% year-on-year (y-o-y) increase in consolidated operational profit to ₹3,283 crore for the quarter ended 30 June. Its net profit, however, was down 6% y-o-y.
“The reported PAT drop is on account of two one-off gains last year; we had a gain of ₹405 crore on our KG Mobility investment at the time of listing of the stock and we recorded a gain on sale of our stake in MCIE for ₹358 crore. These numbers – adding up to ₹763 crore - are not repeated in this year’s [Q1 FY25] numbers", the company said in a statement.
The company reported a 1.8% y-o-y improvement in auto margins to 9.5% in Q1FY25. It did not indicate a specific margin guidance for the current (July-September) quarter, but said the adverse impact from recent aggressive pricing actions will be “negligible".
Price cut strategy
The SUV-maker, which recently reduced prices of its flagship XUV700 by about ₹2 lakh for certain top variants, said it expects negligible impact on its margins due to the price cuts, citing a lower premium on semiconductor prices at present, as well as its capacity augmentation to 10,000 units monthly, which will let it play more “aggressively" in the market.
“The price of the XUV700 had gone up by about ₹4 lakh compared to the launch price over a three-year period and we felt that if we're getting the benefit of this (softening commodity prices, cost reduction efforts), we should firstly pass that benefit to customers," Rajesh Jejurikar, executive director & CEO (auto and farm sector), M&M said. “Secondly, (we wanted to) use that as an opportunity to grow the size of the pie, and that gives us operating leverage."
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Jejurikar indicated the company could initiate similar pricing actions on other products to expand accessibility for its products, even as he remarked that there's no plan to cut prices across a whole portfolio of products.
"In any segment, we will try to do the right trade-off between a sweet spot—customer price, the right margin, and the ability to grow volume," he said.
Market share gains, strong volume growth
Market share gains were a “key theme" this quarter, Shah told analysts and investors in a post-earnings call on Wednesday. The company reported a 130 basis points increase in its SUV revenue market share to 21.6%, with strong volume growth of 24% in Q1FY25, beating industry growth volumes for the quarter by a significant margin.
It also said its light commercial vehicle market share (sub-3.5 tonnes) was up 160 basis points to 50.9% and for tractors, up 180 basis points to 44.7% market share.
“Margin expansions is the second big theme for the quarter, reasonably substantial, resulting in auto profit after tax up 35%, and farm up 4% in a tough market," Shah said.
