BackMahindra’s passenger vehicle business seen under pressure due to increased competition
The SUV segment has been main volume driver in the domestic market as car makers are flooding the market with new productsCompetition further intensified with the entry of Kia Motors and MG Motor India, in 2019, with their respective mid-size utility vehicles, Seltos and Hector
PremiumAs competition in the sport utility segment is set to intensify in the coming years, the position of Mahindra & Mahindra – once a leader in the segment – couldwitness decline or marginal growth in market share in this lucrative segment, according to analysts in brokerages.
The Mumbai based company which once used to command more than half of the sport utility vehicle market, witnessed rapid decline in market share to 25% and below due to increased competition in the SUV segment from almost every other passenger vehicle manufacturer.
Maruti Suzuki – country’s largest vehicle manufacturer- eclipsed M&M as the largest SUV maker in India, after the launch if its first compact sport utility vehicle, Vitara Brezza in 2016. South Korean vehicle maker, Hyundai also been eyeing the spot with its compact SUV, Venue and mid-size SUV, Creta. Mahindra, despite launching three products in the compact SUV space could not wrestle back the top spot.
“While M&M’s strength in the tractor business is highly appreciated by investors, concerns around its auto business (due to weakening position in SUVs) exist. M&M’s SUV segment challenges are garnering disproportionate mind share of investors, despite it contributing less than 30% to the top line and less than 10% to core PAT," said analysts of Motilal Oswal in a report on June 2.
The sport utility vehicle segment has been main volume driver in the domestic market as car makers are flooding the market with new products. The competition further intensified with the entry of Kia Motors and MG Motor India, in 2019, with their respective mid-size utility vehicles, Seltos and Hector.
“While M&M is trying to catch up with competition on the products side, we see limited visibility for M&M to make a comeback. We have not built in benefits of any imminent launches or material benefit on product development from M&M’s recent joint venture with Ford India," added the analyst in the research note mentioned above.
Mahindra and Mahindra announced a joint venture with American vehicle maker Ford Motor Company in 2019, for collaboration in areas like product and technology development and exploring new synergies which will help reduce cost.
The investors though are expecting the company to benefit significantly from a quicker recovery in demand in the rural areas due to its leadership position in tractors and pickup vehicle segment.
“In the Indian auto sector, M&M has one of the highest exposures to rural markets (65% of volumes), which are expected to be less impacted by the ongoing impact of the COVID-19 pandemic. Also, M&M is relatively better positioned for faster recovery in rural markets due to limited impact on tractor demand, and its passenger UVs (Bolero, Scorpio, etc.) being highly popular in rural areas," the analysts further mentioned.
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