New Delhi: Auto major Mahindra & Mahindra (M&M) on Friday expressed optimism about growth in the tractor segment, but anticipates a recovery in the commercial vehicle segment only in the next fiscal year.
“We expect the industry to grow at over 15% in Q4, which will take us to an annual expected growth rate of around 7%,” Rajesh Jejurikar, Executive Director & CEO (Auto and Farm Sector), M&M said during the company’s post earnings media conference call.
This optimism comes on the back of good reservoir levels, smooth rabi sowing, a strong kharif production growth, and hike in MSP of key rabi crops namely wheat and mustard. The terms of trade also remain favourable, he said.
In CY2024, the tractor segment clocked retail sales of 8.94 lakh units, marking a growth of 2.55% over 8.71 lakh units sold in CY2023, according to the Federation of Automobile Dealers Associations (FADA).
The sector touched new all-time highs during January-December 2024 period, the industry body said.
Mahindra, the leader in tractor sales in India, reported an increase in margin expansion in Q3 FY25 in this segment. Its sales were up 20% year-on-year to 1.21 lakh units in Q3, increasing its market share by 2.40 percentage points to 44.2%.
While the tractor business is smaller in revenue, it is more profitable than the automotive business.
However, Amarjyoti Barua, Group Chief Financial Officer, M&M said the company’s international business is weak, driven by macro headwinds in export markets. “It’s important for us to look for a structural change in the market versus a temporary headwind. That is an evaluation, especially in our farm businesses, that we will continue to do in the fourth quarter,” he said.
Commercial Vehicles
Jejuriker expects “small, single-digit growth” in LCVs (less than 3.5T) in Q4.
“We were hoping for a revival in Q3, but it’s too early to say if that’s happening in Q4. Currently, there are no signs of a significant recovery,” he said.
Demand in the M&HCV segment remains weak, which Jejuriker finds “surprising” as it has been subdued for some time. He hopes the upcoming investments into infrastructure development will stimulate a pickup in demand.
As per the retail sales data by FADA, performance in the CV segment during CY2024 was subdued amid election-driven uncertainty and reduced infrastructure spending. It reported a minimal year-on-year growth of 0.07% to clock 10.04 lakh units during the year.
SUV Demand
The maker of XUV700 and Thar stated that both urban and rural markets have performed well for the company, unlike some automakers where rural markets have outpaced urban ones.
Jejuriker believes demand in the domestic market is driven by vehicles priced between INR 10 lakh and INR 25 lakh. “Our strategy is to focus on the INR 7 lakh to INR 25 lakh range, and now we’re extending to INR 30 lakh with electric SUVs.”
Last year, Mahindra introduced its first two electric origin SUVs– BE 6 and XEV 9e. Customer bookings open on February 14, with sales at 250 outlets nationwide. Initially, the company aims for an output of 5,000 EVs per month.
By CY2027, the automaker is looking for EVs to account for 20% to 30% of its sales, translating to 1.2 lakh to 2 lakh units annually.
The company will not launch any new models in the ICE category in CY2025, though existing SUVs may see upgrades. “We expect significant activity with new products in CY2026.”
Q3 Consolidated Performance
In the October-December 2024 quarter, Mahindra reported a 20% growth in consolidated Profit After Tax (PAT) at INR 3,181 crore over the corresponding quarter of the previous fiscal. The company had posted a consolidated PAT of INR 2,658 crore in Q3 FY 2023-24.
Revenue for the quarter jumped 17% year-on-year to INR 41,470 crore from INR 35,299 crore a year earlier.
“Auto and Farm delivered solid performance on market share and margins, on the back of focused execution. The transformation at TechM is gathering momentum,” Anish Shah, Managing Director & CEO, M&M said.
