At M&M, A Return To Form And Substance

Mahindra & Mahindra Ltd. has stemmed its slide in India’s sports utility vehicle market, a category it once dominated. Not just that, it’s clawing back territory.

The impetus came from the newest Thar. The Mumbai-headquartered automaker has sold over 30,000 units of the four-wheeled drive so far this year. That’s higher than the earlier variant’s sales in the preceding five years combined.

The XUV700, its latest, has been a runaway hit, clocking over 70,000 bookings in the first month of the launch. Waiting periods stretch to nearly a year.

“There’s no doubt that brand M&M has transformed and, obviously, this is just the beginning,” Puneet Gupta, director of automotive sales forecasting, advisory and product planning at IHS Markit, told BloombergQuint over the phone. “These are stepping-stones.”

The signs of a turnaround for the maker of Bolero SUV coincide with an unprecedented global shortage of semiconductor chips—the brains of electronic components. In India, M&M was among the worst hit as the pandemic snapped supply chains.

Yet, demand drives optimism. The company jumped a spot over a year earlier to be India's third-largest carmaker last year, beating newcomer Kia India Pvt. M&M's share in the overall passenger vehicle market rose to 7% from 6%.

XUV700 (Source: M&M)

Till nearly about a decade ago, the Mahindra Scorpio ruled the SUV market. From ferrying employees to offices and back in India’s offshoring capital of Bengaluru to farmlands of Punjab and Haryana, it was the first choice. Then, a spurt of launches by peers hit the market.

Buyers loved Renault SA’s Duster and Ford Motor Co.’s EcoSport, both cheaper than the Scorpio, denting M&M’s position even as demand for SUVs spiked.

The Anand Mahindra-led company acquired the struggling Korean carmaker SsangYong in 2011 to shore up its line-up. The, Rexton, the first product from the stable in India in 2012, failed.

M&M continued to slip. In July 2017, Maruti Suzuki India Ltd. unseated it as India’s top utility vehicle maker, riding on the success of its compact SUV Vitara Brezza.

Mahindra’s share in the market for utility vehicles stood at 53% six years ago, according to data shared by JATO Dynamics. It’s 17% now.

Ford exited India and Renault failed to recreate the Duster’s magic, but competition has only intensified. The Kia Seltos, MG Motor India Pvt.’s Hector, and Hyundai Motor India Ltd.’s Creta are in so much demand that buyers have to wait for months to take deliveries. M&M’s cross-town peer Tata Motors Ltd., having scripted its own revival, has a lineup of compact SUVs, including the Nexon and the Harrier.

And utility vehicles now contribute half the car sales in India.

It’s not that Mahindra didn’t try. But the TUV300, the Alturas G4 and the Marazzo minivan didn’t click with buyers.

Things started changing with a new management.

What Changed?

The transition began in 2019 when the company named Anish Shah, the group strategy chief, to succeed then Managing Director Pawan Goenka in 2021 as part of the top leadership succession plan.

One of Shah’s first moves was to set out a road map to revive the Mahindra Group by exiting money-losing businesses and writing down almost all losses in a restructuring. In the last two years, M&M has stopped investing in unprofitable SsangYong and has put it on the block. The company also exited U.S. electric startup GenZe and Australia-based small aircraft manufacturer GippsAero Pty Ltd.

“They have become more focused, and it’s visible from their actions,” Ravi Bhatia, president and director of the industry researcher JATO Dynamics India, said. “They have stopped diverse explorations in many places and are focused on dominating one space, and that’s SUV.”

The two big hits—the XUV700 and the Thar—were planned under the old management. But the new team—Shah, Rajesh Jejurikar, executive director of the company’s auto and farm sector; and Veejay Nakra, chief executive of the automotive sector—reworked the strategy around the new launches.

Earlier, the management was aggressively working to increase market share but with minor improvement in products, Gupta of IHS Markit said. The new team doesn’t have that baggage, he said. They are carrying forward the legacy, but with a fresh strategy and “energies, ideas, and is thinking out of the box”.

So apart from exiting categories not core to M&M, they focused on churning out premium products, rebranding and marketing.

The new management has made clear they're going to focus on the core SUVs, not the lookalikes or the entry-level utility vehicles, said Nikunj Sanghi, chairman of Automotive Skill Development Council and a dealer for M&M.

Customers inquiring about Mahindra Thar at M&M dealership. (Photographer: Nishant Sharma/BloombergQuint)

Styling

While M&M was known for its rural connect, people in cities want cars that are more global and at a competitive price, Gupta of IHS Markit said.

The new team at Mahindra changed that with the Thar, and followed up with XUV700. A premium look and feel was on display.

Dealers said that fuelled curiosity.

Customers are impressed, said a Delhi-NCR dealer for the company who didn't want to be identified out of business concerns. A lot of first-time car owners have taken to the Thar and the XUV700, he said.

Both the models have helped M&M increase share in the metros by attracting the younger and the premium customer, he said.

Fresh cabin design of XUV700 with the latest logo. (Source: M&M)

Earlier this year, the company hired Pratap Bose, former design head at Tata Motors Ltd., to lead Mahindra Advanced Design Europe. Bose was tasked with changing the company’s logo to reflect the ongoing transition. The XUV700 bears that badge.

And that premium theme runs across its dealerships with a new-charcoal and red palette.

Still, it’s not just the looks that have undergone an overhaul.

The company also increased incentives to showrooms, according to the dealer quoted earlier. He didn't disclose details.

What's clicking, according to the dealer, is M&M’s strategy of going deeper into the bigger cities with smaller 1,500-2,000-square-feet outlets. It’s mostly a showroom with just the two star items on display—the XUV700 and the Thar—and is mostly a digital store, the dealer said.

Mahindra didn't respond to BloombergQuint's emailed queries.

Safety

Mahindra has scored on safety.

The company has improved its engineering and design with recent products, focusing more on safety. The XUV700 has been awarded five-star safety rating by the Global New Car Assessment Programme, and ranks on top along with the Tata Nexon and the Punch, and M&M's own XUV300.

XUV700 is also one of the very few carmakers to even offer autonomous emergency braking as a safety option, part of advanced driver assistance systems, said Gaurav Vangaal, associate director at IHS Markit.

All of this has helped improve performance and perception of their cars, he said. “Getting the latest technology to their cars like ADAS, driver drowsiness detection features, and others is no longer a concern for them, which is helping them change perception."

Earlier, the impression was M&M will borrow from Ford or SsangYong, Bhatia of JATO Dynamics said. The new management has made a tangible change, he said.

Gupta agreed. "All this shows they are not just refurbishing the products but have rebuilt them from scratch."

Customers checking Mahindra's XUV300. (Photographer: Nishant Sharma/BloombergQuint)

Pricing

Both the new hits from Mahindra are competitively priced. The XUV700 was launched at an inaugural price of Rs 11.99 lakh, while the Thar, a segment in itself, is now priced at Rs 12.78 lakh.

“They now provide to customers,” Vangaal said. “They have smartly placed XUV700 in the Rs 12-13 lakh price point, which is also a feature-rich car.”

Mahindra also made some corrections on the way. “The XUV300, which is a good product initially, failed to live up to their potential because of high pricing,” Sanghi said. M&M cut its tag by up to Rs 1 lakh last year to boost sales—which it did.

A Step Into The Future

Mahindra, along with Tata Motors and Hyundai, has taken the lead to prepare a road map for an electric future, betting that battery-powered vehicles will start overtaking gas guzzlers by 2030.

Of the 13 new SUVs planned by 2027, M&M said after its second-quarter earnings, eight will be electric. In all, it plans to unveil 16 EVs across categories.

The company aims to spend around Rs 3,000 crore on its EV launches. And it’s open to external funding, Shah said at the post-earnings conference call.

It has already partnered with Reliance Industries Ltd. and BP Mobility Ltd. to develop charging solutions for battery-powered three- and four-wheelers, quadricycles and small electric commercial vehicles.

Also Read: M&M Plans Electric Variants Of All Its SUVs - Exclusive

Early Days

A lot can still go wrong in M&M’s pursuit of restoring market leadership. Replicating the initial success of its new models with other launches in an extremely competitive and SUV market won’t be easy.

“The only thing they need to do is consistently introduce products and keep (up) the excitement,” Vangaal of IHS Markit said. M&M, he said, has created the euphoria and it’s crucial that they maintain it.

“If M&M sticks to its timelines and hastens the new product development, they will be able to maintain this momentum,” he said. If not, according to Vangaal, the turnaround story will be gone after one or two products.

That’s where Mahindra’s supply constraints will also hurt. The eKUV100, officially launched in the Auto Expo in February 2020, and the electric version of the XUV300—which was supposed to go up against the Tata Nexon EV—have been delayed.

Sanghi said M&M was the "worst impacted automaker" because of the chip shortage, suggesting there are challenges unique to them.

"If they aren’t able to convert bookings, then those are a mere number,” he said. “The real success comes in when they’re able to tighten their supply chain.”

Also Read: M&M Shares Gain As CLSA Expects Core Business Growth To Drive Rerating