New models fail to reverse slide in Mahindra’s market share

Mumbai: India’s largest utility vehicle maker’s hopes of recovering market share in the segment remain elusive as most of its new models—including the TUV3OO, the KUV1OO and the NuvoSport—introduced over the past 12 months have failed to live up to volume expectations.

Mahindra and Mahindra Ltd’s share of the utility vehicles market plunged to 29% in the first four months of the current fiscal year, according to the Society of Indian Automobile Manufacturers (Siam), an industry body, indicating that the incremental sales generated by the new models has not been enough to boost the Mumbai-based firm’s steadily declining market share.

A collapse in the sales of the company’s old workhorse, the Bolero, strong competition in the sport utility vehicle (SUV) market and a shift in buyer preferences from diesel to petrol vehicles following regulatory changes are some of the factors that have led to Mahindra’s undoing. If anything, with the auto maker having exhausted the pipeline of launches, at least in the near term, the road ahead for the Anand Mahindra-led firm is fraught with potholes.

Mahindra’s share in the utility vehicle space has been dropping consistently. From a peak of 55.59% in 2011-12, it shrank to 47.67% in 2012-13, falling further to 41.72% in 2013-14 and 37.36% in 2014-15. The new launches in 2015-16 led to a marginal recovery. It closed the year with a market share of 37.9%, according to Siam. The company’s total utility vehicle sales rose 7% to 222,324 units. But it was still 15% less than what it was in 2012-13, according to Siam data.

The loss in market share doesn’t bother Pravin N. Shah, chief executive, automotive division at Mahindra. “We continue to be the leaders in the utility vehicle space and remain upbeat about the strong product pipeline we have,” said Shah, adding that over a period of time, the lines between passenger and utility vehicles had blurred, with hardly any “true-blue SUVs” in the market that are direct competitors to Mahindra models.

He blamed the sharp decline in Bolero sales on weak rural demand. With demand recovering in rural India, Shah expects Bolero sales to pick up.

Mahindra plans to launch a couple of new variants of the Bolero to boost sales, said a person familiar with the company’s plans, requesting anonymity. Shah declined to comment.

Shah attributed the lower-than-expected volume run of new models to a price correction and discounting done by rivals such as Ford and Maruti Suzuki.

In a post-earnings call with analysts, Pawan Goenka, executive director at Mahindra, said the company is taking steps to neutralize the impact of the price correction.

“There are many, many things that we’re doing to take care of these short-term impacts that have come because of things that are in the outside environment,” said Goenka.

Mahantesh Sabarad, deputy head of research at SBICap Securities, said sales of the flagship Bolero and Scorpio models have been victims of scaremongering about diesel vehicles.

“The ban on diesel vehicles in Delhi has had a psychological impact on buyers of diesel vehicles throughout the country. They either postponed their decision to buy one or switched to petrol models of rival firms,” he said. With the ban now getting lifted, Sabarad expects demand to kick in during the festive season.

Commenting on the weak performance of the newly launched models, he said strong competition from rivals such as Maruti Suzuki’s Vitara Brezza has impacted sales of the TUV3OO and NuvoSport. He blamed the inappropriate positioning of the KUV1OO for lower-than-expected volume. “It was to wean buyers off the hatchback segment as well as compact SUV segment. Clearly, that hasn’t happened,” he said pointing out that unlike Maruti Suzuki’s Baleno and Swift, the KUV1OO has failed to straddle a wider segment. Goenka, during the call with analysts, said that while the company does have some bookings, it is not enough to ramp up production of the KUV1OO to 7,000 units as the high demand seen in the initial months has moderated now. The firm will maintain production at 5,000 units a month.

A Mahindra dealer, who declined to be identified, said inappropriate pricing of the new models was also behind flagging sales. “Nobody wants to be paying ₹ 9.7 lakh (the price of a top-end variant, ex-showroom Delhi) for a TUV3OO when there are better, more competitively priced models available in the market,” he said.

Mahindra’s maiden sub-4m SUV was launched on 11 September 2015. But the launch of Maruti Suzuki’s Vitara Brezza on 8 March with prices starting from ₹ 7.36 lakh to ₹ 10.14 lakh and Ford paring prices of the EcoSport by up to ₹ 1.12 lakh just a few days later put paid to Mahindra’s hopes of recouping market share.