M&M unlikely to ditch diesel despite EV drive

Contrary to the long-term strategies chalked out by global brands like Porsche, Toyota, Volvo, Fiat Chrysler Automobiles, Audi, Skoda, Volkswagen, etc., which have either ditched diesel entirely or intend to move away from it over the next couple of years, Mahindra and Mahindra (M&M) has categorically stated that it will not be walking away from ICE (internal combustion engine) vehicles.

In fact, the country’s largest manufacturer of utility vehicles will be upping its monthly output of ICE SUVs (excluding pick-up trucks) from 29,000 units to  39,000 units by FY23-end, and 49,000 by end-FY24. This is over and above the capacities it has planned for its Born Electric (BE) range of zero emission vehicles, which will be rolled out in the next couple of years.

Some of M&M’s most popular diesel vehicles are the Bolero Neo, the Bolero, the Scorpio Classic, Mahindra Thar, and the XUV700. The company is scaling up capacity to reduce the extended waitlists for some of these models. For instance, the number of XUV700s produced per month will go up from 6,000 to 7,000. The number of Scorpio-Ns produced will go from 6,000 to 10,000 per month.

“We will continue to produce diesel engines in the BS6 (stage 1 and 2) avatars. These are extremely fuel efficient and actually help (the company meet) the CAFÉ norms. Diesel engines are our  strength, hence we will continue with them. Many of the companies which have exited diesel didn’t really have much (sales) volume,” Rajesh Jejurikar, Executive Director (Auto & Farm Sectors), M&M, told reporters after announcing the second quarter FY23 results.

The Corporate Average Fuel Efficiency (CAFE) norms are a set of government regulations aimed at reducing fuel consumption and lowering carbon dioxide (CO2) emissions. These are applicable to petrol, diesel, LPG, and CNG-powered vehicles.

M&M, which recorded its highest quarterly revenue for auto and farm segments during Q2FY23, claims to have the maximum revenue market share (RMS) in the SUV segment. Its sales volume during the quarter went up by 75 percent over last year —from 99,334 units to 1,74,098 units.

Sharing the capex outlined for three financial years ending FY24, Jejurikar said that M&M will be investing Rs 15,300 crore, a lion’s share of which (Rs 7,900 crore) will be deployed towards building capacity for ICE vehicles, followed by Rs 4,000 crore for electric vehicles (EV), and Rs 3,300 crore for the farm segment.

M&M expects  petrol and diesel vehicles to comprise a substantial chunk of its portfolio over the next few years. “Looking at the nature of the country, until 2030, a large portion of our portfolio will still be ICE, and our sense is that if you look at the industry as a whole, ICE would comprise 60-70 percent of volumes,” added Jejurikar.

Jejurikar said that by 2027, it expected EVs to comprise between 20-30 percent of its total sales. By then, it expects to sell 12,000-17,000 units of its BE range of electric SUVs per month.

Asked about the penetration of EVs in the future, Jejurikar explained: “It is a combination of regulation and demand. For every automaker, the challenge is to understand and straddle both the options. Demand cannot grow in a significant way unless charging infrastructure builds up at scale. In a country like ours, that means deep penetration into rural markets.”

At Rs 2,090 crore, M&M has posted a 46 percent jump in its net profit in Q2 FY23, as against Rs 1,433 crore a year ago. The company's revenue was up 57 percent at Rs 20,839 crore, versus Rs 13,314 crore in the year-ago period. (https://www.moneycontrol.com/news/business/mahindra-mahindra-net-profit-zooms-46-in-q2-on-sales-volume-surge-9496281.html)