The high demand for SUVs has worked well for Mahindra & Mahindra, but it does not rely only on them...
Mahindra & Mahindra (M&M) has come a long way from being just a jeep manufacturer to churning out hip-and-hit SUVs on Indian roads.
Why you should buy M&M?
SUVs, the new "it" thing: In recent times there has been an explosion in demand for SUV's – a category that did not really become fashionable till the launch of the decades-old model of Toyota Qualis. Today, the share of SUV's in the total passenger car market has risen from 14 per cent 3 years ago to 20.3 per cent. In the last 3 years SUV category has grown at 18 per cent annually – higher than the 16 per cent growth posted by sedans. In YTD13, the segment grew a whopping 61 per cent and M&M with its early focus on this category has managed to capture 60.5 per cent of this market.
Not a one-trick pony: Mahindra does not need to rely on SUVs alone to keep its cash registers ringing. It is present in a number of categories: the light commercial vehicles (LCV) medium and heavy commercial vehicles (M&HCV), passenger cars and tractors.
LCVs to drive growth: M&M has a formidable presence in the LCV segment with a market share of 29.4 per cent. Growth in LCVs has been at a high 18. 2 per cent (y-o-y, in CY12). Mahindra has launched a number of vehicles addressed to this segment like the Bolero Pickup (mini truck), Gio (compact truck and small cab), Maxximo, Gio and Genio (all variants of pickups).
Ruling the rural market: M&M has always been very strong in the tractor segment. It was the leader with 31 per cent market share in 2007 when it acquired Punjab Tractors, owners of famous "Swaraj" brand. By 2012, Punjab Tractors had done complete turnaround. Standalone revenues tripled to Rs 3,000 crore, bottomline jumped six times to Rs 500 crore. M&M and Punjab Tractors have a combined market share of 42 per cent.
Deep dealer network: M&M, by virtue of its long presence in the commercial vehicle segment, today has 200 main dealers and around 600 service network for its utility vehicles. The depth of the service network is essential for M&M to build its brands across the country. Many international brands without a strong presence in India have failed because of this count. GM for instance had to close down its Opel brand of passenger vehicles (the famous Opel Astra was a rage at its time) in 2006. At the time of closure, the company had only 80 service centres across India!
Capex plans: M&M has plans to invest Rs 500 crore in capex over the next three years. It envisages an investment of Rs 250-300 crore into its subsidiaries.
M&M with its hit SUVs and successful tractors appears to have struck the right formula to speed ahead of its peers. Hang tight.