Mahindra & Mahindra also known as M&M is well recognized for its flagship vehicles like the Bolero, Thar, and XUV series. While the company has faced stiff competition from companies like Maruti Suzuki, Hyundai, and Tata Motors, things seem to be changing gradually. The automaker has recently announced the launch of its new vehicle, the XUV 700. Starting at just Rs 11.99 lakh (ex-showroom price), XUV 700 has sent petrol heads abuzz because of the dazzling features it offers. The company has also seen immense growth in its commercial vehicle, electric vehicle, and farm sector equipment segments. In this piece, we discuss how Mahindra is revamping its strategy and how it could add to its profitability in the coming years.
Farm Equipment Sector
Mahindra is the largest farm equipment manufacturer in India. As of June 2021, it holds a 41.8% market share in FES, the highest in the last eight quarters. India had a healthy monsoon this year. The ongoing monsoons coupled with the upcoming rabi Kharif sowing season can give a boost to this segment.
The company launched the updated versions of their flagship PVs, Mahindra Thar, and Mahindra Bolero Neo. With high demand, the Mahindra Thar has a 10 month waiting period while the Bolero Neo already had 4000 bookings before the first model hit the showroom. The company has launched its latest SUV variant, XUV 700. The variant comes with features that were seldom seen in earlier models. One can expect a huge waiting period since the launch of XUV 700 has set the auto market abuzz. The XUV 700 is expected to contribute significantly in terms of sales.
In the small commercial vehicle segment, the company launched its ‘Supro Profit’ range of trucks in July. The vehicle was met with a healthy demand in the market.
The company is forraying into a different segment of electric vehicles (EVs). Mahindra’s Reva, e3o, and e-Verito were a huge success in the segment. Nonetheless, it hasn’t been able to compete with counterparts such as Tata’s Nexon or Tigor EV. Apart from passenger vehicles, Mahindra is one of the few companies that manufacture electric three-wheelers/rickshaws. As public transportation in India is shifting gears and progressing towards electric vehicles, a boost in sales of this particular segment could contribute immensely to revenue flow.
Mahindra CEO Anish Shah has said the company plans to invest Rs 3,000 crores in its EV-arm over a period of three years. The company has also set a goal of having 5 lakh electric vehicles on road in India by 2025.
Financial Performance and Future Prospects
In the first quarter of FY22, M&M’s profit was Rs 423.9 crore against a loss of Rs (-)97.6 crore in the same quarter last year. The company’s revenue for Q1 FY22 was up 17.24% and Operating Expenses went up by 24.57% over the same period.
However, M&M’s share price hasn’t performed well as compared to the NIFTY Index. As of June 29, 2021, M&M’s share price has only returned 25.36% over a year, compared to NIFTY 50 return of 45%. In 2013, M&M had acquired South Korean automaker Ssangyong for Rs 32,000 crore. Ssangyong remained a liability for M&M all these years contributing hugely to M&M’s losses. The company filed for bankruptcy in December 2020.
The last quarter has been fruitful for Mahindra & Mahindra. There has been a significant boost in sales in the Farm Equipment Sector (FES). In the Commercial Vehicle (CV) segment, the company has launched the Mahindra Supro Profit. Mahindra has also launched the latest version of their flagship Passenger Vehicles(PVs) – Thar and the Bolero Neo. The company is planning to draw competition by launching more vehicles in the SUV and the EV segment by the end of 2021.
While companies like Maruti Suzuki and Hyundai rule the auto sector in India, their focus has not been on EVs as such. Mahindra on the other hand has already invested Rs 500 crore in Research and Development (R&D) for EVs. With a lineup of new vehicles, Mahindra’s focus on EV and recovering auto market indicate a healthy revenue growth for the company.