The most well-known sports utility vehicle (SUV) manufacturer in India, Mahindra & Mahindra (M&M) Ltd., wants to grow its traditional SUV business while also putting more power into its electric cars (EVs). The strategy takes into account the company’s rapid increase in conventional SUV sales, the uncertainty surrounding the future growth potential of EVs, and the growing awareness of hybrid cars.
As a result, M&M has allocated a larger capex of ₹14,000 crore for its traditional IC-engine business, in addition to the ₹12,000 crore it has stated it will invest in the EV industry over the next three years. By 2030, the latter will see three model revisions and six entirely new SUVs, the firm revealed on Thursday, along with its Q4 FY24 results.
The company’s robust performance in its main automotive division, which saw standalone net profit for the auto and agricultural business rise 32% to ₹2,038 crore for the quarter ended in March compared to the same period last year, is what prompted the ₹26,000-crore capital expenditure drive. The carmaker reported that during the quarter, it sold 126,000 utility cars, setting a record.
During the fourth quarter of FY24, M&M‘s operating revenue climbed by 11.24% year over year (y-o-y) to ₹25,108.97 crore from ₹22,571.37 crore. EBITDA margin stayed constant at 12.4% during this quarter, although operational income increased 12% year over year to ₹3,119 crore from ₹2,789 crore in Q4FY23. Earnings before interest, tax, depreciation, and amortisation are referred to as EBITDA. On Thursday, the company’s shares closed 3.05% higher at ₹2,372.85.
Capital expenditure financing and outside investments on Mahindra & Mahindra (M&M) Ltd.
The firm stated that it plans to produce all of the operational capital required through its revenue. Therefore, its investment in its EV arm, Mahindra Electric Automobile Ltd (MEAL), will be self-funded. As a result, it has chosen to prolong the period for the last tranche of the ₹725 crore investment from its backer, British International Investment (BII), while Temasek, a Singaporean company, will give it ₹900 crore “as per the agreed timelines.”
Temasek joined MEAL’s cap table in 2023 with an investment of ₹1,200 crore, while UK-based BII had signed a contract to invest up to ₹1,925 crore in MEAL in 2022. To date, Temasek and BII have contributed ₹300 crore and ₹1,200 crore, respectively, to the company.
Why use a parallel strategy?
M&M anticipates that by 2027, its future grounds-up EVs will make up 20–30% of its SUV sales, but since its internal combustion engine SUV business has been producing “good financial returns” for the company, it will “aggressively” pursue growing that segment. At a press conference following the company’s earnings, Rajesh Jejurikar, executive director and CEO (auto and farm industry), spoke. Over the coming years, he continued, “We will have a very strong IC-engine portfolio.”
Large automotive OEMs aren’t yet putting all of their eggs in one basket, according to Anish Shah, managing director of Mahindra & Mahindra. Shah stated that the company’s decision to split capital expenditures between EV and IC-engine operations beyond 2027 will rely on the rate of EV adoption over the next three years. This gives you flexibility to adjust your plans for EV investments based on how the market reacts to the cars.
“A lot will rely on how rapidly EVs ramp up starting in FY2027. Based on events that transpire over the following three years, we will evaluate whether or not the IC-EV balance changes at this time, according to Shah. Though the company is now “feeling good about our focus on EVs,” he reaffirmed that they are “ready for hybrids,” which have been gaining popularity in India and around the world over the past year.
By the conclusion of FY25, M&M plans to increase its monthly production capacity by 15,000 units, bringing its total capacity to 64,000 units, up from 49,000 units at the end of FY24. In FY25, the company would boost production of its current SUV models by 5,000 units, and in FY26, it would raise production of EVs by 10,000 units. By FY26, production would ramp up to 72,000 units, with an extra 8,000 units of EV capacity.
In just one hour, the SUV manufacturer, according to Jejurikar, received 50,000 reservations for the XUV3XO, its newest model. By the conclusion of Q4FY24, it had 220,000 units of total open orders, the majority of which were for the Scorpio and Scorpio-N.
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