Marazzo launch on September 3. Of the three launches that we are going to do, two are in the volume segment — the Marazzo and S201 and one in the premium segment — G4 Rexton, Pawan Goenka, MD, M&M, tells ET Now.
Edited excerpts:
Everyone has been eagerly waiting for Marazzo launch and finally it is happening next week. Tell us what makes it your best designed vehicle so far? How are you going to position it and price it?
We are very excited about what is coming up on Monday, 3rd of September. The big launch of Marazzo will take place in Nasik. We always like to do our launches in the plant itself because that way you get a better feel of what the product is about and how it is being manufactured. The buzz, the excitement that I see about Marazzo launch is quite high.
We are quite confident that this vehicle will create a buzz after launch. We obviously are leaving no stone unturned to ensure that we have absolutely the perfect product to offer to our customers and also ensuring that the price is exciting for customers. We are working on that and we will know in six days whether we have succeeded or not.
Second half is going to be a fairly busy time for you in terms of new launches. With key models lined up, how confident are you of winning back the lost market share in UV space?
Well I do not want to comment on market share because that depends also on how the industry is going to do but when I look at the three launches that we have, two of them are in the volume segment — the Marazzo and S201 and one in the premium segment — G4 Rexton.
We expect a volume of 8,000-8,500 per month. But we do not know how much of that may be through cannibalisation though these three products are in a very different sub segment compared to our current products. I would expect to see a very healthy volume growth percentage wise and therefore a market share growth.
During your concall last month, you mentioned hiking the UV guidance closer to the second half of the fiscal. Any update on that?
We are going to wait till after August and perhaps even September before we take a firm call on guidance for the festive season. Up to now, July has been pretty good despite a bit of a slowdown. If that kind of growth continues, this will turn out to be one of the biggest growth year for the industry in almost all segments and therefore the indications are all positive.
You have clocked in strong double digit margins for four-five years now. What are the margin levers you are betting on to sustain this momentum?
So far, we have managed to keep our margins good and in fact in the last two, three quarters, we have seen the highest margin that we have seen historically in tractor business. The levers are always same — plant productivity, material cost and spreading our fixed cost over a larger volume. None of those levers ever dry up completely though it always gets more and more difficult. As long as volumes keep increasing at a healthy pace, we will be able to maintain our margin.
You are also looking to expand your market share from 43% to 50%. How do you plan to do that?
Market share expansion is in three parts; we have the Mahindra brand, the Swaraj brand and a new brand called Trackstar.
Trackstar is a small volume game right now but we do expect that over four-five years, Trackstar should give us 2-3% market share and that will be significant addition and obviously a little 0.5%-1% on each of our two brands will give us 3-4%. Now, it is easier said than done, because in tractor industry there are no weak players and market share has to add up to 100 for the industry. Therefore, for us to gain, somebody else has to lose and therefore I am not going to become very definitive about it that this year.
The tractor industry historically always has been very stable in terms of market share and never would you see a change of more than 0.5%-1% market share for any specific brand. Therefore, to get to 50% is going to be a long haul, not something that is going to happen next year or the year after.
Last month. Bajaj Auto disrupted the two-wheeler market by announcing a price war to gain a larger chunk of the market. Do you see a similar pricing strategy taking place in the passenger vehicle segment too?
I would not say a price war but I would say the industry has become a lot more competitive and there is no segment or sub segment where anybody has a monopoly. Therefore, every player has to look at their pricing in relation to competition. Every player wants to increase market share; some perhaps go a little more after market share and compromise with maybe financial performance and some probably balance the market share and financial performance. But I do not see anything which I would consider a price war.
The picture painted for us looks quite robust at least for the next one or two years but what about FY21 onwards, especially since that is when BS-VI rollout will take place?
I definitely think that just when we get into BS-VI, prices will go up a bit, depending on which segment you talk about. For diesel vehicles, it will probably go up Rs 60,000 to Rs 100,000; for trucks, may be as much as Rs 2 lakh up. That is a fairly significant increase in price and therefore there will be pre-buying and there will be sticker shock when the new prices come in. I would expect a temporary slowdown, but after six months, the market will get used to it and after that it will be business as usual. Any dip that I see, will be a short lived dip of about three months, six months or nine months timeframe.
How is the EV business working out? FAME 2 has just been announced and how does it affect M&Ms mobility business?
The EV business has just gotten a boost from the FAME 2 scheme and that has been approved by the government of India. It has to now go to the Cabinet and then get approved. That is a longer-term commitment of five years rather having a six-month, one-year kind of a commitment.
In FAME 2, with a five-year commitment, the industry players will become more serious about investing in product technology and capacity for electric vehicles and we should therefore see a faster ramp-up for EVs starting about now.
Having said that, I have been saying something similar for a long time and therefore perhaps have a lower believability about how fast EVs can ramp up. But what I can tell you is that for Mahindra, we have many small winds. When I say small winds, it means that at least there are 12-15 fleet operators or aggregators who now have a fleet of electric vehicles from Mahindra. It is only a matter of time when these people are able to do their pilots. Once their pilots are over and they get into the volume ramp-up, then it can happen very rapidly.
We will start executing the ESL order of phase 2 very soon and all the various fleets that we have give us the confidence that three to six months from now, we would be more supply constrained than demand constrained.
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