M&M vrooms into SUV mart

The Mumbai-based Mahindra & Mahindra (M&M) is on a launching spree. The auto major, which launched two SUVs in the past few months- Marazzo and Alturas G4, recently unveiled the name of its upcoming sub-4-metre compact SUV, codenamed S201, which will be known as XUV300.

The XUV300 which is being built on X-100 platform will be launched mid-February next year. The compact SUV segment currently accounts for about 60% in the overall SUV volumes, Pawan Goenka, MD, M&M said, adding, the company looks to corner about 15% market share of this segment with the new vehicle. He further said that as of now the company does not have a very strong product in the compact SUV segment but XUV300 will fill this gap.

The compact SUV segment has been growing at a compounded annual growth rate (CAGR) of 44% over the last five years while the current market size its stands at around 35-40,000 vehicles per month. "It is a fast growing market and we want to capture a sizable markets share out of the segment," Rajan Wadhera, president Automotive Sector, M&M.

The XUV300's launch will come even as M&M recently launched two other SUVs in the past few months- one a volume guzzler Marazzo and another the high margin product Alturas G4. The strategy to launch new products and variants happen as the company lost the number one position in the utility vehicle (UV) segment to the car market leader Maruti Suzuki in FY18. Further, during the period from April-June (FY19), the company saw its market share thinning to 23.96%, which is said to be its lowest in past around 10 years, as new competition launched several dozens of SUVs in the Indian market.

Thankfully, for M&M while Marazzo acted as a saving grace as it stormed the sales record during the recently concluded festive season when all its other products had a rather lacklustre show. If not for Marazzo, the insiders revealed, the company would have seen a de-growth in the segment. Some of M&M rivals too witnessed their sales drop on account of poor consumer sentiments, lack of liquidity in vehicle finance, high insurance charges, among other reasons.

Likewise, Alturas G4, though a low-volume but high-margin product has come as a serious challenger to some of its competitors like Toyota Fortuner and Ford Endeavour.

According to Pawan Goenka, MD at M&M, for the first time the UVs are growing at a slower rate than the passenger vehicle (PV). Goenka at a recent analyst call, when asked about steps taken to prevent eroding volumes in some core models, said that the launch of new products will help in increasing UV volume growth. The UV segment has seen a de-growth of about 3% in the past few months.

According to analysts, apart from market share, M&M also need to worry about it margins as it has taken a beating in recent times. The company's margins from the automobile business went down by about 2.7% in comparison to the previous year.

The insiders blame it to the rising commodity prices, higher promotional expenses and introductory pricing for its products. However, the margins may increase in future for newer launches as the product matures. For example, with Marazzo the impact of introductory pricing and the maturing production will reduce the impact by 0.5% over a period of time, the company executives said.

Sridhar V, partner, Grant Thornton India LLP said that M&M is upping the presence and competition with a slew of introductions and facelift positioning them at different segments like MPV, compact SUV and premium SUV and also different price points drawings synergies from its investments in research centres for design and capabilities, investment in new platforms and various acquisitions like Ssangyong and Pininfarina.

ZOOMING AHEAD

• 60% – of overall volume is accounted by the SUV segment presently
   
• 2.7% – M&M’s margin from the automobile business went down
   
• 23.9% – thinning was seen in market share by the company