Mahindra adopts aggressive pricing strategy with launch of new version of XUV500
The new version of Mahindra’s XUV500 is priced at Rs12.32 lakh (ex-showroom, Mumbai), almost Rs50,000 less than the on-road price of the outgoing second-generation variant
Mumbai: In a bid to regain lost ground in the utility vehicle (UV) segment, home-grown auto conglomerate Mahindra and Mahindra Ltd has adopted an aggressive pricing strategy for the third-generation model of its XUV500 SUV (sport utility vehicle), launched Wednesday.
Introduced with a base price of Rs12.32 lakh (ex-showroom, Mumbai), the facelift costs almost Rs50,000 less than the on-road price of the outgoing second-generation variant.
However, the company did not cite market share losses as the primary reason behind the competitive pricing.
“Pricing is not a decision taken only for (gains in) market share; Mahindra is known for providing the best value to customers. There is a combination of things that will lead to a rise in market share, not just pricing,” said Veejay Nakra, senior vice-president, sales and marketing, at the firm.
Nevertheless, Nakra conceded that the sales figures would “go up substantially based on the price and value built in”.
The maker of the popular Scorpio and Bolero SUVs has steadily lost market share in the UV segment, from 55.59% in fiscal 2012 to 25.38% in the 2018 fiscal, according to data provided by industry body Society of Indian Automobile Manufacturers (Siam).
Competitors such as Hyundai Motor India Ltd and Maruti Suzuki India Ltd capitalised on an increasing consumer preference for petrol SUVs over their diesel counterparts, which is Mahindra’s mainstay, thus resulting in significant market share losses for Mahindra.
During the 2018 fiscal, the company’s UV segment sales grew at 5.1% year-on-year, lagging behind the broader UV segment’s 20.97%. The growth can largely be attributed to buoyant sales of the Scorpio and Bolero on the back of a broad-based rural recovery in the past four to six months.
While Mahindra has been working towards on the development of three new petrol engines by 2020 to increase the mix of petrol models in its overall portfolio, the Mumbai-based automaker will continue to hold diesel as the fuel of choice, according to Rajan Wadhera, president of the automotive division at the firm.
“The development of petrol engines is on track; we will be fully prepared to give all our products with petrol and diesel engines as required (by customers),” Wadhera said, adding that “there is no reason why diesel shouldn’t continue as it is. Many customers still want the torque of a diesel engine”.
Wadhera is confident of meeting the Bharat Stage VI (BS6) emission norms by 1 April 2020 for both petrol and diesel engines, while insisting that diesel would be the cleaner fuel post BS6.
Close to Rs150 crore was spent on the third generation XUV500, which comes with new engine settings to enhance torque and power, in addition to features such as a quieter cabin, cruise control, and a tyre pressure and temperature monitoring system.
On the question of maintaining margins on the new model, Wadhera said it was not a cause of worry as the company’s “value engineering efforts helped reduce the price, consequently packing in more technology and features, while remaining competitive”.
Analysts say the refreshed XUV500 may not drive volumes because of its relatively high-end positioning within the SUV segment.
“Only a facelift cannot drive volumes like a new product, especially within the SUV segment. Beaides, the XUV500 is not a volume product, like the Bolero or Scorpio,” said an analyst on condition of anonymity.
Mahindra needs a broad-based improvement, including a revamp of the Scorpio and Bolero, this analyst said, while conceding that this particular model can help gain share within its sub-segment as it caters to tier-1 and 2 cities where customers are increasingly upgrading to larger cars.
To be sure, Mahindra has three entirely new product launches lined up during the fiscal, which could potentially drive volumes, in addition to sharing vehicular architecture platforms with Ford Motor Co. and its Korean subsidiary Ssangyong Motor Co. Sharing platforms brings costs down to a third of the original and reduces lead times of model development to two years from four, according to Wadhera.
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