M&M to ramp up XUV-500 production; see UV sector growth

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M&M to ramp up XUV-500 production; see UV sector growth

Speaking to CNBC-TV18, Arun Malhotra, senior vice president-sales & customer care- automotive division at M&M says that the company expects further growth in the utility vehicle segment. “M&M is trying to ramp up production of the latest on the block- the XUV 500,” he says.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Mah and Mah See previous management interviews See what other Experts & Brokerages are saying about Mah and Mah Mah and Mah BSE | NSE 29/05/12 Are Mutual Funds betting on Mah and Mah?

Passenger vehicles sales and non-tractor sales have come in strong for Mahindra & Mahindra in the third quarter of this fiscal. In fact, the segment has witnessed growth of 22% in January alone. Speaking to CNBC-TV18, Arun Malhotra, senior vice president-sales & customer care- automotive division at M&M says that the company expects further growth in the utility vehicle segment. "M&M is trying to ramp up production of the latest on the block- the XUV 500," he says.

Below is the edited transcript of the interview. Also watch the accompanying video

Q: Your passenger vehicle and your non tractor sales have clearly impressed. Can you tell us if this is the run rate you can maintain?

A: If you look at our growth rate, in the first 10 months of the financial year, we have grown by 28%. In January, we have grow by 22%. We have to remember that last year January was a good month; the industry is growing very strong. So coming on high base figure, this 22% growth and since it is all time high for us for our sector at 44,717 units, we are hopeful that we should be able to continue in the near future.

Q: But in the tractor part there has been a bit of a disappointment. I am not sure you look at these numbers very carefully but if you have picked up anything from your management on the sales being down is that a trend?

A: Tractor, I cannot comment on, anything on the auto any portfolio I will be pleased to comment on.

Q: In Ssangyong, there has been 5% degrowth month-on-month and it's been second or third month where we have seen below estimate kind of a number. What is the expectation on that front?

A: Unfortunately, since Ssangyong falls on the export market and I look after domestic sales, I am not the best person to comment on Ssangyong

Q: Will you be able to speak on utility vehicles (UV)?

A: Yes.

Q: Utility vehicles have been a positive surprise, what is the expectation on UV?

A: Our expectation is good and there are two-three reasons for it; one, XUV 500, we have passenger UV, we have a very strong demand and we are trying to ramp up production because our capacity is only 2,500 unit. We are trying to increase the capacity to 3,000 units in a short period. Our traditional core products of Scorpio and Bolero still have a strong pull in the market, so we are very positive on the passenger UV segment.

Q: On most of your products, how is pricing looking like, is there a need to increase pricing at this point or are the margins stable or the elbow room to raise?

A: We had raised our prices around 8th January, so it's hardly been about four weeks since we have increased our prices. So we cannot plan for a price increase now. We have increased them and in some models, they were substantial and some they were lower, they varied from 1-3% at that point of time.

Q: We got the impression last quarter October-December specially that things are getting a bit dire as far as consumer durables are concerned on a macro-economic level. You don't see that on the ground or you see comeback on the ground in terms of demand?

A: The way I see it, the India growth story beyond the top cities is still growing very strong. I think the reality is better than the sentiment because we get coloured a lot by what is happening in mergers and acquisitions, and things which are international based. Since most of our sales is very domestic...

Q: It is important that you say that rural demand or non-metro demand is much better... Is metro demand showing any sign of saturation and how good is rural demand?

A: Metro demand has not gone down by up-country demand where lot of people feel that the rural money is drying up, it doesn't reflect for us. As far as our products is concerned, even our product Bolero which is our large volume product, we still have waiting for four-six weeks. Scorpio is also going strong. So I certainly believe that if you can penetrate new markets, reach out new segments, have more financing available with more finance partners, there is still an opportunity to grow. If something extraordinary happens in the economy in next two months, then you cannot say, but the way things are today and it has held true for first six months, we feel we will go along those lines.