M&M gears up for festive season with a robust 2.9 lakh SUV booking pipeline
Speaking with CNBC-TV18, Veejay Nakra, President of the Automotive Division at M&M, expressed optimism as they enter the festive season with nearly 290,000 bookings in the SUV segment.
Homegrown automaker Mahindra and Mahindra (M&M) is all set for the festive season with a substantial pipeline of 2.9 lakh sports utility vehicle (SUV) bookings. In August, M&M witnessed a remarkable 25 percent surge in automotive sales, with SUV sales reaching an all-time high.
Veejay Nakra, President of the Automotive Division at M&M, while speaking with CNBC-TV18, expressed optimism as they enter the festive season with nearly 290,000 bookings in the SUV segment.
Below is the verbatim transcript of the interview:
Q: Very strong sales, month after month SUVs are doing phenomenally well for you, but tell us what kind of average monthly run rate are you looking to achieve over the next few months given that the festive season is upon us and there is also a lingering worry about the deficient monsoons that we have in August? Do you see that dampening demand in any way?
A: Yes, robust performance for the month and while we do not give guidance going forward, what I would like to mention is that we have been talking about our capacity at about 39,000 per month for SUVs and if you look at the month that we just closed, we were there in terms of delivering to our capacity to 99-100 percent of our capacity. In terms of going forward, the key thing is that while we have seen a little bit of disruption in the monsoon in the month of August, there is a view that September would be a lot better. But as we get into the festive season, we are getting in there with a lot of our supply. So, there are three things, the supply chain issues, which we have managed well, month on month and we have worked around that to make sure as we get into the festive season, we take care of that one lever. The second one is capacity, which we spoke about, we already have that in place. The third one is demand and, on the demand, front we continue to have a very strong demand on all the brands, especially the blockbuster launches we have had – 700, Thar, Scorpio N, Scorpio Classic. So, we are getting into the festive season with close to a 2.9 lakh booking pipeline on the SUV front. So, we are pretty bullish as we get into the festive season.
Q: We had a conversation with the management of Maruti and they said that almost 50 percent of the industry now is SUV sales. And that is remarkable. I mean, they are doing a lot of work in this space as well. For your own business, given that SUVs are such a large portion now, how much do you think you can take it up to over the next one to two years? What will the contribution from SUVs be to the overall business and would this mean better blended margins for you? If yes, how much could they be?
A: First, on the volume going forward, we have put out there saying that we are well on track to getting our capacity for SUVs to 49,000 per month at the exit of Q4 of this financial year (FY24) and we are well on track to get on that. We also have two launches in the next calendar year 2024, where we have the five-door Thar coming in, and we also have the midcycle enhancement of the XUV300. So, there is a lot of excitement in store as we get into the next calendar year, be it new launches, or an increase in capacity. So, all of that will play out in helping us get to the kind of volumes we want to do. And of course, we have always said profitable growth. Difficult to comment or give guidance in terms of blended margin going forward, but if you look at our Q1 results, we are back to FY19 levels of margins. At the end of Q2 of FY22, we talked about a three-percentage point improvement in margin, and we delivered that well before that. And we ended Q1 with a margin of 7.5 percent at the PBT level. So, the financials are strong, the focus is on profitable growth, capacities are being enhanced, the supply chain is being catered to month on month and the demand continues to be strong. There is one more thing I want to talk about, while all this focus has largely been around SUVs, there is also the less than 3.5 tonne segment which is a very significant size of industry and even part of our portfolio both in terms of volume and profitability. And I am very happy to even mention that we ended last month where we have crossed 50 percent share, we ended the month at a little over 50 percent share of the less than 3.5-tonne segment. So, from an overall volume perspective both the small commercial vehicles, which are less than 3.5 tonne and SUVs both have a strong performance currently and going forward.
Q: What is the response to electric XUV400? What are the learnings? Are there more launches in the pipeline? If you could give us a rough idea about the monthly numbers, how do you see that panning out?
A: We have always said that the XUV400 is our first electric vehicle (EV) launch and we have always said that we are going to approach it a little cautiously going forward. It's a different category, we want to make sure that we have the product absolutely right as we go in there. At the launch, we had mentioned that we would want to deliver between 15,000-18,000 vehicles in the first 12 months. We are in the process of ramping up to get to that level, keeping a very close eye on product quality and delivery. There is a lot in store on the XUV400 front in terms of offerings to the customer, which we will bring out in the future. So, we are on track in terms of delivering on the XUV400. I think the category itself is seeing a little bit of challenges going forward and if you looked at August numbers, from an overall volume perspective, if you look at month on month, it didn't grow the way one expected it to grow and sometimes the disruption in the category or the expansion of the category happens when there is disruption of products that get launched. We have a very exciting offering, which we will launch starting December 2024. We have put that out there that we have five products in store that we would be launching and a lot of that will help in terms of expanding the category.
Q: Your passenger vehicle market share would be around 10.5 percent odd now.
A: Yes, thereabouts.
Q: How is that going to trend going forward? Would you be able to inch up, where do you see it in the next six months?
A: That is what I mentioned, demand is robust, and capacities are going to go up from 39,000 per month to 49,000 per month at the end of Q4 (FY24). We have managed the supply chain reasonably well. I think that is still going to be a challenge going forward for the next 12 months, especially given that most of the capacity being set up on the semiconductor side is non-auto-grade semiconductors. So, there would be some challenges on the supply chain side that we need to manage. And with hopefully the monsoon playing out in September, we think as we get into the festive season, it should be pretty robust for us.
(Edited by : Vivek Dubey)
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