Auto News
M M raises tractor growth forecast, maintains SUV sales optimism
Summary
- The company is also confident of achieving 15-18% growth in the passenger vehicle segment in FY25.
New Delhi: Homegrown automaker Mahindra and Mahindra Ltd (M&M) has raised its forecast for tractor sales for the industry, anticipating strong growth fuelled by rising rural demand as government spending in the rural and agricultural regions goes up. The company now expects tractor industry sales to grow by 13-14% in the second half of the year, adjusting its full-year projection to 6-6.8%, up from an earlier estimate of 5%, a top company official said during its second quarter earnings press conference on Thursday.
Simultaneously, M&M remains confident of achieving 15-18% growth in the passenger vehicle (PV) segment in FY25, driven by new launches and a strategic pricing strategy amid a broader sluggishness in the PV market.
M&M reported a 35% year-on-year jump in its consolidated net profit to ₹3,171 crore for the second quarter of FY25. Its auto business recorded its highest-ever quarterly dispatches at 231,038 units, a growth of over 9% over the corresponding period last year. M&M’s tractor sales during the quarter rose 4% YoY to 92,382 units.
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On a standalone basis, M&M made a net profit of ₹3,841 crore for Q2FY25, a 13% increase from the previous year.
Most notably, despite reducing prices by up to ₹2 lakh across for the top variants of its flagship XUV700 SUV, higher sales volumes and the resultant operational leverage led the company to improve its Ebitda margin for the standalone auto business by 190 basis points to 14.2% from 12.3% a year ago. Net revenue per vehicle during this quarter was up 10% year-on-year, it said. Ebitda is short for earnings before interest, taxes, depreciation and amortization.
The company cautions that margins after the launch of its upcoming electric vehicle (EV) launches would be adversely impacted due to factors like higher marketing expenditure, but eventually will settle at the same level as its internal combustion (IC) engine portfolio “once out of the launch phase."
Now, it is trying to add more capacity to maximize deliveries of its latest Thar Roxx.
“Our SUV capacity is at 54,000 units a month, a 10% increase since March. We closed last year at 49,000, which we had outlined, and we have now reached our target of 54,000," Rajesh Jejurikar, executive director and chief executive officer, auto and farm sectors, M&M, noted.
M&M will add a dedicated EV capacity of 10,000 units from next year.
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Despite countries in the European Union and at home adopting a more cautious stance towards EVs in the backdrop of subsidy cutbacks and lacklustre demand despite price cuts, Jejurikar told Mint it is “more optimistic" about EV demand than it was last quarter.
“I am more optimistic than I was last quarter. The market will start doing very well with good launches. When the quality of the product offerings in the market improves, there will be customers coming in," Jejurikar told Mint. “We’ve seen a very good launch recently and it is doing good numbers which is very encouraging. The EV penetration in India is 2%, whereas the stagnation in the western world is coming after a 15% EV adoption. Our belief is the right products will create huge opportunities," Jejurikar said.
Different countries in the European Union have seen varying levels of EV adoption, with the Nordic nations leading.
Tractor segment gains momentum with rural recovery
On the farm equipment side, M&M has leveraged strong rural demand to drive its upward revision in tractor growth. According to Jejurikar, the farm equipment segment saw a volume increase of 3.7% when the industry grew at 0.6% in the second quarter, even though there were some disruptions in the international markets.
Jejurikar emphasized that the growth was part of a broader trend of rural revitalization, bolstered by improved settlement rates and higher agricultural spending. “We see a volume uptick in rural settlements, and spending is on the rise. The farm margins have grown alongside market share, reaching 18.7% in Q2—a quarter typically lower for margins," he said.
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M&M’s focus on market share expansion has paid dividends, with the company marking its highest-ever market share in Q2. Jejurikar credited these gains to a “holistic set of actions" in M&M’s farm sector strategy, which has helped solidify the company’s position as a leader in India’s tractor market.
