Jun 29, 2013, 08.11 PM | Source: Moneycontrol.com
Analysts say the Ford EcoSport will sell well given its superb pricing and host of features and sales could easily touch 15,000-20,000 in 3-4 months.
Mahindra & Mahindra has by far been the most successful sports utility vehicle maker in India. It sells nearly half of all SUVs sold in the country. Ford launched its much anticipated EcoSport earlier this week, which analysts say can be a game changer. But can it end M&M's hold on the SUV market?
The biggest advantage for Ford, analysts say, is the killer price its been launched at. EcoSport's starting price of the petrol version is Rs 5.59 lakh ex-showroom Delhi and that could tempt buyers from its rivals.
Ford has launched the EcoSport in the sub 4 metre segment in India to benefit from lower taxes. Its direct competitor here will be M&M's Quanto, which was launched in September 2012.
To be fair, M&M's UV portfolio straddles across segments and price points, right from the Quanto to the Bolero (favourite in rural markets), the Scorpio, Xylo and the premium XUV 500. It also sells the Rexton SUV from its Korean subsidiary Ssangyong's portfolio.
Ford, before the EcoSport, was selling only one SUV in India, the Endeavor. But the EcoSport could make the difference. The new EcoSport was launched in Brazil in August last year and analysts say its been selling briskly there.
Cassio Lucin, JP Morgan analyst in Brazil, says year-to-date in 2013, Ford has sold 27,000 units of the new EcoSport and it has helped Ford garner 40 percent market share in the compact SUV category and 2.5 percent market share among all passenger vehicles sold in Brazil this year.
It is launching in India on the back of strong demand shift towards the SUVs. However, the SUV segment has also started feeling the heat of the overall slowdown in the auto sector in the country. Sales have some what slowed in the last couple of months, especially due to the additional 3 percent excise duty imposed on SUVs in the Union Budget.
Sales of M&M's utility vehicles and the Verito sedan rose just 5 percent in May at 22,244 units. Last financial year, sales had grown 27 percent. With demand tapering and new players entering the market, its market share has already come down to about 48 percent from 56 percent, a year ago.
Analysts say EcoSport could see strong sales on the back of the pricing and other features loaded on the SUV.
"The new EcoSport will attract consumers as its pricing is very competitive and it offers a variety of features including, air bags, voice commands, push botton start, etc," said Umesh Karne and Manashwi Banerjee of Brics Securities.
They expect EcoSport's initial bookings to go up to 15,000-20,000 within 3-4 months.
Antique Stock Broking analysts Ashish Nigam and Saksham Kaushal feel one can't rule out EcoSport eating share from premium hatchbacks, mid-size sedans and entry-level SUVs.
"Considering that the Duster (from the weaker pedigreed Renault) manages a volume run-rate of a noteworthy 5,000/month, we believe that the EcoSport can garner retails of 8,000-10,000 per month. Ford will nibble this from M&M (Quanto), Maruti (Ertiga/DZire), Renault Duster and some entry level sedans," they said.
However, half of M&M's sales come from rural markets and there the company has little competition.
The Brics Securities analysts also feel that post the initial euphoria, EcoSport's sales are likely to stabilise at around 3,000/month.
The EcoSport generated a lot of euphoria ever since it was showcased at the Delhi auto expo last year. The company too left no stone unturned in promoting the vehicle, so much so that analysts say people have defered their vehicle purchases to wait and check it out. The pricing now has also been a cracker.
M&M has already said it is bound to lose some market share as competitiors launch new SUVs. With the EcoSport going on sale now and more players waiting to join the race, its surely a hard but interesting battle ahead.
M&M stock price
On May 27, 2016, Mahindra and Mahindra closed at Rs 1335.15, down Rs 1.95, or 0.15 percent. The 52-week high of the share was Rs 1441.45 and the 52-week low was Rs 1092.00.
The company's trailing 12-month (TTM) EPS was at Rs 50.46 per share as per the quarter ended December 2015. The stock's price-to-earnings (P/E) ratio was 26.46. The latest book value of the company is Rs 310.09 per share. At current value, the price-to-book value of the company is 4.31.
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