Sales of diesel utility vehicles (UVs) from India?s largest UV maker, Mahindra & Mahindra (M&M), grew over 25% in April and May, but the company is taking no chances, given the looming slump in auto sales. The Anand Mahindra-led firm expects to stay ahead of the industry growth with its varied product portfolio of diesel cars and by widening its presence in the export market.
?The products in our portfolio are not competing with each other, but complementary,? Pravin Shah, chief executive (automotive division) and member of group executive board of M&M told FE. ?This helps us grow better than the industry and already in April and May, we have grown at 29% and 27%, which is better than the industry.?
Growth in passenger car sales slowed down to 2.8% in May 2012, a seven-month low. Several car makers are also stopping production at their factories as inventories pile up at the dealer end.
The country?s largest car maker, Maruti Suzuki, has idled 30% of its petrol car production capacity. Others like Tata Motors, Volkswagen, Fiat, Toyota Kirloskar and General Motors are going for staggered shut downs at their plants and non-production days as they try to cut production in line with the demand.
However, M&M?s Shah said that disruption is temporary. ?Temporarily, there might be some setbacks, but demand for cars will not be impacted so much in the long run,? he said. ?By the second half of the fiscal there might be better growth in car sales and industry body SIAM has also a similar outlook.?
?Rising interest rates is a concern but there is enough liquidity in the banking system for people to seek finance if they want it,? Shah added. ?Interest rates make a big difference in commercial segment but not so much of a difference in the personal segment. People are still going and buying cars.?
Nearly 90% of M&M?s car sales come from diesel variants. The uncertainty about whether the government will impose a tax on diesel vehicles could disrupt the company?s plans, say analysts.
?As long as the uncertainty over duty on diesel vehicles persists, the overhang on demand for M&M?s passenger UV is likely to continue,? Mumbai-based brokerage firm Anand Rathi Investments wrote in a research note on June 11.
M&M?s dealers disagree. ?There is no inventory pile up and in fact, because of rising petrol prices, M&Ms diesel cars are in huge demand,? said an Uttar Pradesh-based M&M dealer. He owns four dealerships across the state of UP. ?People want to buy the cars before the tax comes in so there is a rush.?
With its latest sports utility vehicle, the XUV 500, M&M also expects an improvement in its export volumes. In the fiscal 2012, the company?s export volumes fell 7.72% to 4,266 units. The XUV 500, launched in November 2011, was late to hit the international markets due to overwhelming demand.
However, production capacity of the XUV 500 has increased to 4,000 units per month now and will be raised to 5,000 units in the next three to four months.
?Last year we did well in Sri Lanka, Chile and South Africa,? said Pawan Goenka, president of the automotive and farm equipment division of M&M after announcing the company?s fiscal 2012 results on May 31. ?This year we expect the pull from the export markets to continue.?
?Now that we have a strong product range which allows us to fully exploit the export market we expect to get good volumes in overseas markets,? he added.