Mahindra & Mahindra (M&M) is ramping up capacity and consciously reducing the order backlog to bring down the long waiting period for delivery of vehicles to customers, says Anish Shah, Group CEO and Managing Director of Mahindra Group.
"One of the biggest challenges we face today is that consumers have to wait a long time for our vehicles; that has come down with the order book coming down and with our capacities going up. And that will come down even further," he told CNBC-TV18.
As of February 1, average booking volumes were around 50,000 per month, while the delivery average (billings) increased to 40,000 per month, the company said in a presentation to investors.
The open orders backlog for its Sport Utility Vehicles (SUVs) reduced to 2.26 lakh as of February 1 from around 2.86 lakh units at the end of November 2023.
Shah also allayed concerns about a demand slowdown in the SUV segment given the nearly 21% year-on-year (YoY) decline in February to November orderbook. "We have not seen much moderation (in demand), which I guess is a function of the models we have and the strength of those models. We do keep hearing about moderation across certain parts of the economy. But we haven't really seen that."
With a 21% market share, M&M is the largest SUV maker in the country and currently ranked number one is in the segment from a revenue standpoint, he highlighted.
M&M has been gradually increasing its SUV capacity and expects to exit the fourth quarter of the current financial year with a capacity of 49,000 units a month versus 39,000 units a month last year, per the investor presentation. The company expects the SUV portfolio to grow in mid to high teens in FY25 versus a 3-4% growth for the overall passenger vehicle industry.
Discussing the cut in tractor volume guidance from flat to negative 5% for the current financial year (FY24), Shah said the segment is expected to be affected by cyclical downtrend but "we are not looking at the rural market as being as distressed as is talked about."
Margins in the segment have been fairly consistent despite persistent volatility, he said.
He also shared his views on the recent shifts in the electric vehicle (EV) ecosystem with the government now keen to have the likes of Tesla, VinFast in the country and contemplating a new EV manufacturing policy giving duty concessions to companies who commit to manufacturing in India in a two-three year timeframe. "Our message to these companies is: if you believe in India then Make in India," Shah said.
M&M reported
double-digit earnings growth for the third quarter ended December 2023. Net profit for Q3 rose 61% YoY to
₹2,454 crore from
₹1,528 crore. Total auto volumes for the quarter were up 20% at 211,000.
HSBC sees an extended El Nino in FY25 and a slowdown in SUV momentum are key risks for the company. Morgan Stanley, however, expects tractor business decline rate to trough out in March 2024.
M&M's profit figure was in-line with CNBC-TV18's poll of ₹2,353 crore.
Dipan Mehta, Director of Elixir Equities is positive and sees a ray of hope for tractor business as a result of a normal monsoon prediction for the current year. “It's a matter of time before farm equipment also starts to contribute significantly as it has been doing so,” he said.
The current market capitalisation of M&M is ₹2,06,058.94 crore. The stock has gained more than 31% over the past year.
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First Published: Feb 16, 2024 11:08 AM IST