Mahindra and Mahindra (M&M), which has primarily been focussing on diesel-powered Sports Utility Vehicles (SUVs) for many decades, is now training its guns on battery-operated electric vehicles (EVs).
With its recent announcement on allying with the Volkswagen Group for sourcing components from the European automaker’s MEB (open platform for EVs) for its purpose-built electric vehicle platform INGLO, the homegrown utility vehicle maker is looking to roll out five electric SUVs under two brands—XUV and the all-new electric-only brand Born Electric (BE)—by 2027.
Several analysts Moneycontrol spoke to reckon that the move, which is a win-win proposition for both partners, would lead to faster electrification in India and would support a rapid rollout of new EV products.
“Support on critical component supply from the German car maker would aid M&M on entire value chain of EV development. This would also create synergy between the two for future EV development in the Indian market. So it’s win-win situation for both,” said Mitul Shah, Head of Research at Reliance Securities.
Puneet Gupta of S&P Automotive believes that this partnership will give a new life to Mahindra as it has been primarily a diesel player.
Taking aim at 1 million units
“Even today, 70 percent of its sales are derived from diesel vehicles. So this announcement was very important for Mahindra for their survival as diesel (powertrain) is actually dying across the globe. On the other hand, VW has the upper hand as it will be able to capitalise on its MEB platform for which it has invested billions of euros. It will actually help VW in reducing the cost for its Indian projects as M&M will be making parts in India,” said Gupta.
While making the announcement, the partners revealed that the cooperation intends to have a volume of more than “one million units over lifetime” and that it includes the equipment for five all-electric SUVs with MEB components. M&M is also confident of selling 200,000 electric SUVs a year by 2027, which could potentially generate revenue of around Rs. 50,000 crore for its e-vehicle subsidiary (EVCo).
Furthermore, the company expects 30 percent of its sales to come from EVs in five years.
M&M revealed its ambitious plans at a time when electric cars are gaining a lot of traction and rival Tata Motors is experiencing unprecedented growth in its e-cars.
Tata Motors’ sales dwarf Mahindra’s
According to the Federation of Auto Dealers Association (FADA), 17,802 electric cars were sold in 2021-22; Tata Motors commanded an 85 percent share of the market thanks to phenomenal numbers generated by the electric variants of its Tigor and Nexon.
M&M could manage to sell only 156 e-cars during that period. During Q1 FY2023, while Tata Motors’s retail sales were close to 7,000 units, M&M could barely dispatch 42 units. This is because Mahindra does not have a significant presence in the electric passenger segment. However, it is the leading player in the domestic electric three-wheeler space with more than 70 percent market share.
An analyst from Prabhudas Lilladher said over the medium to long term, M&M's strategic partnership with VW can significantly contribute to the electrification of vehicles in India—a space currently dominated by Tata Motors.
Mansi Lall, Research Analyst at Prabhudas Lilladher, said, “The targets set by these companies can also aid market share gains for M&M. We now need to see how XUV400 (M&M's first EV) is priced and starts taking this market share from Tata's Nexon EV, because M&M’s planned launches will begin in December 2024, which is two-and-a-half years away. Mahindra should witness a healthy volume growth, 2HFY23 onwards, owing to it strong existing order book and XUV400 launch in the next month.”
Capital infusion
M&M earlier outlined plans for a capital infusion of Rs 10,000 crore in the EV business during FY23-27 for platform, powertrain and product development as well for building assets. This was after it announced the infusion of Rs 1,925 crore in its EV subsidiary by British International Investment (BII) at a valuation of $9 billion.
Out of Rs 10,000 crore earmarked, M&M is spending Rs 2,000 crore on EVCo.
“With funds coming from selling part stake in EV business to BII, M&M would use that for strategic investment in the EV space and this is the beginning towards that, we believe. So yes, it would surely be very important in terms of its journey in EVs and get prepared from a global perspective,” said Basudeb Banerjee, an analyst at ICICI Securities.
Considered a pioneer of the Indian EV industry, M&M took a majority stake in Chetan Maini-owned Reva Electric Car Co Ltd in 2010 and renamed it Mahindra Reva Electric Vehicles Pvt Ltd.
M&M further renamed the company Mahindra Electric Mobility and introduced e-cars like the e2O and e2O Plus but sales failed to meet expectations and the models were eventually phased out.
Partnerships that didn’t work
M&M is known for its multiple failed partnerships in India and abroad. The most recent it formed was with Ford in 2019 to create a joint venture that will work towards developing and selling cars in the domestic market. But thanks to the coronavirus pandemic, the JV was called off in less than two years.
More than a decade back, M&M acquired a controlling stake in SsangYong Motor of South Korea to expand its portfolio of premium SUVs in the Indian market. However, the South Korean brand was saddled with mounting debt and Mahindra was compelled to look for a new buyer.
M&M also bought out the 49 percent stake of its US joint venture partner Navistar Group in its commercial vehicle joint venture Mahindra Navistar Automotives Ltd (MNAL) and Mahindra Navistar Engines Pvt Ltd (MNEPL) in late 2012.
In 2007, Renault signed a partnership with Mahindra for the formation of Mahindra Renault Limited, a joint venture. They had to terminate the partnership as the Logan model failed to attract buyers.
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