M&M goes back to basics to claw back SUV market share
M&M’s market share in the utility vehicle segment had fallen to 15% in FY22, from 53% a decade ago in FY12
Mahindra & Mahindra Ltd’s (M&M) latest bet to claw back market share in the sport utility vehicle (SUV) market by winning urban customers, the Scorpio-N, is expected to drive up volumes for the automaker in the growing, mid-sized and premium SUV segments.
The Scorpio-N is part of M&M’s strategy to appeal to a new demographic by reinforcing and reshaping its existing brand appeal. The runaway success of the new Thar is an example of that strategy.
At a combined annual market size of nearly 500,000 units, the C and D categories of SUVs as they’re respectively known, together form close to 16% of the total passenger vehicle market in India.
The Scorpio-N, designed on a new platform with “no carryover from the existing Scorpio", is likely to benefit from a positive rub-off effect of recent successes like the Thar and XUV700, potentially limiting the risk of cannibalization within its own portfolio as it looks to attract a new set of urban customers, according to industry experts.
Mahindra & Mahindra’s market share in the utility vehicle segment had fallen to 15% in FY22, from 53% a decade ago in FY12, as competition from South Korean and homegrown carmakers continues to intensify. Success of its new Scorpio, which also saw the model’s market share fall to nearly 2% from 22% a decade ago, will be critical for it to reclaim marketshare in the UV segment, where it is currently the fourth-largest player after Maruti Suzuki, Hyundai and Tata Motors.
With sustained demand for new launches and better supply chain management, M&M could see monthly UV sales to rise to 30,000 units from the second half of this financial year, from its current production run rate of about 24,000 vehicles, according to ICICI Securities. M&M can produce up to 6,000 units of the Scorpio-N a month.
However, the brokerage firm expects the aggressive pricing of M&M’s portfolio cars to continue into FY24, keeping auto industry margins under pressure.
Meanwhile, M&M expects to face fewer production disruptions going forward as it factors in in high demand for top-end trims of the Scorpio-N, and plans its parts supplies accordingly.
“For the XUV700, for example, 75% of the sales come from two top-end variants. For the Scorpio-N, we are preparing for high demand to come from the top-end versions. We are better prepared from a chip procurement, planning etc perspective than we were at the time of the launch of the XUV700," Rajesh Jejurikar, executive director, Auto and Farm Sector, M&M told reporters.
According to M&M, there is an order backlog of 78,000 units for the XUV700 with a waiting period of 18-24 months and a booking rate of 9,000 vehicles a month.
“The Scorpio brand which had a 14% market share in the UV market in FY12, had fallen to about 3% in FY22. The success of this model launch is critical for M&M’s overall market share gains. We build in an overall UV and PV market share gain of about 160 basis points and 140 basis points over FY22-24E to 16.6% and 8.7%, respectively for M&M. The order book stands at 170,000 units as on May end," said Jay Kale, senior vice president, Elara Capital.
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