Mahindra & Mahindra Ltd., the Indian sports utility vehicle maker best known for its tractors and farm equipment, is banking on electric cars and digital services to boost its fortunes under new CEO Anish Shah.
Shah, 51, has his job to do. the $ 19 billion The group’s SUV market share has fallen to 13% from 50% seven years ago. He struggled withfailing investments and the impact of the pandemic on the automotive industry, which led toreported quarterly losses last year, its first in nearly two decades. Last week heended collaborative projects with Ford Motor Co.
This is all a thing of the past, said Shah, who was previously Mahindra’s chief financial officer. “At this point, I see it more as a story of growth than a story of turnaround,” he said in an interview.
Shah lays out a roadmap to revive the Mahindra Group, a 76-year-old conglomerate that leaves losing companies and notes almost all losses in a restructuring. The executive, who has been with the group for seven years, said its future growth will be supported by SUVs, electric vehicles and digital startups.
Investors seem to agree. Mahindra shares have climbed 11% so far this year, outperforming the 3.9% gain in the benchmark S&P BSE Sensex.
With one in three cars sold in India being an SUV, regaining market share is essential for Mahindra, which gets more than 60% of its turnover of the automotive sector. Shah bet on his new Thar model, an all-wheel drive reminiscent of its previous success Scorpio. The new model has a waiting list that stretches until early next year, unlike the lukewarm reception its minivan like the Marazzo or micro SUV like the KUV has received from local customers.
“What we’ve learned is that it doesn’t make sense to venture out of our hearts,” Shah said. “A basic Mahindra SUV has the ability to be an all-terrain vehicle while still having the elegance of driving around a city.”
Indian farmers give Mahindra (and maybe ) a ribbon of Hope
The conglomerate is also betting on electric vehicles as Shah sees them overtake gasoline consumers by 2030. It will invest 30 billion rupees ($ 408 million) in electric vehicles in the short term and launch electric variants of its SUVs. , helped by its beginnings.purchase from an Indian electric car manufacturer in 2010.
Although Mahindra has taken its first steps in the electric vehicle space, the market is filling up with many manufacturers, from Hyundai Motor Co. to Kia Motors Corp., offering their zero-emission cars, while alsoTesla Inc. weighs its entry. But the lack of charging infrastructure and high prices for electric vehicles have slowed the switch to combustion engines.
BloombergNEF is just waitinga third of new passenger cars sold in India will be battery-powered in 2040, compared to 70% in China and Germany.
A difficult recovery
The rebound in overall car sales in India could also be hampered by another wave of the spread of the coronavirus, which has triggered curfews and lockdowns in parts of the country.Vaccine deployment has been slow – at this rate, it will take two and a half years to cover 75% of the population – perhaps prolonging weak consumer demand.
Higher profits for Indian automakers as demand recovers
“The turnaround is possible, but it will be difficult,” said Mayur Milak, senior analyst at BOB Capital Markets. Mahindra must shed its image as a “rugged rural player” as the Indian market shifts to premium SUVs, while price-conscious buyers turn to compact SUVs. “Mahindra cannot afford to lose focus on the SUV segment,” he said.
Shah is also looking beyond automobiles for growth, with plans to venture into digital startups that have the potential to become unicorns.
Mahindra will rely on her new strategy to avoid bleeding money, a lesson she learned from having to sell a controlling stake inSsangyong Motor Co. after suffering for months under increasing losses. The company took a Rs 12 billion depreciation charge from Ssangyong during the quarter ended in December. From now on, units must have a clear path to 18% return or strategic impact or else they will come out, Shah said.
“Our focus on capital allocation is not over,” Shah said. “We would continue to have the financial discipline that will encourage prudence in deploying liquidity, but beyond that, it will also ensure that our businesses stay on track from a performance perspective.”
– With the help of Kevin Dharmawan
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