Mahindra & Mahindra to lose steam in revved-up utility vehicle market

Written by Rachit Vats | Mumbai | Updated: Apr 27 2014, 06:48am hrs
MahindraM&M can retain market share only if it plans for refined products, especially in the UV1 segment. Reuters
Mahindra & Mahindra (M&M), the largest utility vehicle (UV) maker in India, will see its market share in the overall UV space come down to 28% by calendar year 2018 from the 51% at the end of calendar year 2013, industry researcher IHS Automotive forecasts. M&M, which presently sits on top of the UV space with its Scorpio and Bolero models, is seeing increased competitive intensities in the UV1 (compact UV) space, where it currently has a weak presence.

Monopoly days are over now, M&Ms share in the UV segment is set to go down from 51% at the end of CY13 to 28% by CY18, said Puneet Gupta, associate director, IHS Automotive.

The number of newer models in this segment will rapidly increase and consumers, who did not have too many options earlier, will now have multiple brands and products to choose from. Although M&M will not lose on volumes, it will fare badly in terms of domestic market share. M&M can retain market share only if it plans for refined products, especially in the UV1 segment. And this is possible if it has a more collaborative approach with Ssangyong, Gupta added.

As per IHS Automotive, the UV segment is expected to grow 84% in volumes from 6,14,493 vehicles in CY13 to 11,29,767 vehicles in CY18. M&Ms current market share in the segment is 51% at 3,10,568 vehicles, and is expected to grow to 3,16,334 vehicles by 2018.

In the UV1 space, M&M will be seeing stiff competition from at least six top carmakers including, Maruti Suzuki, Ford, Tata Motors and Honda, which have plans to launch multi-utility, sports and compact vehicle offerings in the sub-R10 lakh bracket.

Meanwhile, M&M has been working hard to to compete with rivals in the UV1 space with the launch of two new SUV platforms by CY15. Codenamed S 101, the vehicles are expected to be priced in the R5-9 lakh price bracket and will come with 1.2 and 1.6-litre petrol and diesel variants.

As a market leader in the UV space, M&M should have read the trend and stayed ahead of the competition. The company needs to come up with new top-of-the-class products, said Dharmesh Shah, auto analyst at SBICap Securities.

Two factors will play out in the sector where UV1 will continue to outpace the other segments. M&M will lose market share in the short-term because it does not have a strong presence in the UV1 space where pricing and urban design play a big role. It will, however, launch products in CY15 with a strong price band and petrol variants, but by that time the segment will already be crowded, Shah added.

Further, SUV margins are higher than cars by 100-150 bps and match more or less the compact UVs.

M&Ms market share is vulnerable in the one-year time frame. But it is expected to bounce back in FY16 owing to new product launches. However, M&M needs to work on both product and distribution to address the UV1 segment, said Pramod Amthe, director-automobiles, construction sector, CIMB.

Pawan Goenka, executive director, M&M, declined to respond to this correspondents queries. However, at a recent analysts meet, Goenka admitted that the company was working towards strengthening its presence in the compact UV space.

We will be launching two new SUV platforms and one new commercial platform in CY15... the area where we have somewhat of a void is the small compact UV, we saw the new players have come in and have taken a fairly large market share... Those three launches will significantly strengthen our position in that segment, which is a fast-growing one and where M&M has very small presence right now, he was quoted as saying.

In the UV2 (bigger vehicles) space, M&M sits pretty on the top with about 51,000 Scorpios sold in FY14, more than Renaults Duster, which sold 46,700 vehicles, and Fords EcoSport, which sold 45,000 vehicles, during the period.

Further, amidst the prevailing slowdown that has gripped the auto industry, M&M has picked up market share in the last four months of FY14. As per Society of Indian Automobile Manufacturers, M&M sold 22,898 vehicles in March 2014, a rise of 22% on a month-on-month basis. The total UV segment grew 18% to 51,414 vehicles during the period on a month-on-month basis.

Between December 2013 and March 2014, M&Ms market share grew from 39.4% to 44.5%. Analysts attribute the rise to the Lok Sabha elections in the country, which contributes to higher sale of utility vehicles.