XUV700 marks a start of Mahindra's product offensive to regain SUV leadership

Mahindra & Mahindra, which had dominated India’s utility vehicle market with its tough and rugged UVs like the Commander and Bolero that drove across India’s vast countryside, stormed the premium SUV stage with the XUV500 in 2011. The SUV went on to become a huge hit, aided by its premium features, power, bold styling and more importantly an aggressive price point that attracted many value conscious customers to the premium SUV.

Now, a decade later, the company is looking to replicate that success and more with the XUV700 that was revealed on the eve of India’s Independence Day. In the last few years, M&M has lost market share in the SUV segment as compact and more urban SUVs from the likes of Hyundai, Kia, Tata Motors and Maruti Suzuki gained a lot of consumer attraction. M&M’s own offerings in this space, like the KUV100 and the TUV300, had little success. So, it has gone back to what it knows and does best—big bold SUVs and rugged SUVs. The all new Thar launched in 2020 is doing good business. Now, the XUV700 intends to replicate the success of the XUV500.

The XUV700 is packed with features. The higher variants get many segment firsts, like the ADAS (advanced driver assistance system) on the top trim. There are also other notable features like a dual 10.25-inch screen layout in a massive panel, which includes an infotainment screen and the instrument cluster. It also gets the Adreno X intelligent system with built-in Alexa voice assistant and over 60 connected features, optional high-end Sony sound system, highest in class sun-roof, and up to seven airbags, among other things. The base MX trim will miss out on all of this, but it is still decently-specked and importantly, at prices starting Rs 11.99 lakh, it is extremely competitive.

M&M hasn’t yet disclosed the prices of the high-end trim, but if it can continue with the aggressive pricing, sales could accelerate.

In the year-ended March 2021, M&M’s UV sales declined 13 per cent to 155,530 units, making it the fourth largest player in a segment it once dominated. However, this year ending March 2022 could well be a completely different story for the homegrown company.

The Thar already has a waiting period of 10 months, with over 39,000 open bookings, according to M&M. Elsewhere, the XUV300 (that is based on the Ssangyong Tivoli) has a two-month pipeline with over 10,000 open bookings and the Bolero and Scorpio, too, have open bookings of 4,000 units and 6,000 units respectively. It has also launched the new Bolero Neo, which is expected to see good demand.

The XUV700, when it goes on sale, should only add to the momentum and drive the growth in the automotive segment in the second half of this financial year. The company is also likely to drive in a brand new Scorpio SUV by the end of March 2022. In the years after that, an all-new Bolero, a 5-door Thar, new XUV300, and two products codenamed W620 and V201 will hit the streets.

This is a part of M&M’s renewed offensive to regain leadership in the SUV space, particularly focusing on what it calls “authentic” SUVs. It has also announced a whole new range of Born electric vehicles and two Born EVs are expected to be launched by 2025-26.

“For leadership in auto, there is a series of actions that have been laid out, with 23 new products by 2026. Nine of them are in the core SUV segment, this is obviously in addition to what we have launched already,” said Anish Shah, MD and CEO of M&M.

The company is investing Rs 12,000 crore in capital expenditure over a period of three years, which includes Rs 6,000 crore in the automotive business, Rs 3,000 crore in electric vehicles and Rs 3,000 crore in the farm equipment business. With its renewed focus on the domestic UV business, it has taken steps towards reducing cash burn and prioritising capital allocation. So, over the past year, it put some of its units like Australia-based aviation company GippsAero, US-based electric two-wheeler startup GenZe and Korean SUV maker Ssangyong for sale.

“M&M’s UV product launch pipeline remains strong, with nine new product launches by 2026 across mid/large UVs and EVs, providing long-term visibility on volume trends. Thus, we estimate UV volumes to continue to grow strongly, at 43 per cent/26 per cent in FY22/FY23,” said Kapil Singh of Nomura Securities.

A key bottleneck for M&M as for the wider automobile industry is an acute shortage of semiconductors. In an interaction with analysts last week, Rajesh Jejurikar, executive director (auto and farm sectors) at M&M admitted there will be some constraints on the automotive side due to the semiconductor issue. However, he also felt the company would be able to address those.

“A tightening of chip availability is something that we need to work around. A lot of that is happening because Malaysia, which is (a prime) source of semiconductors, has got into COVID lockdown. And that’s the reason there is a tightening of that. We will wait and watch, but we believe that we should be able to navigate that through,” said Jejurikar.

A sharp rise in commodity costs is another worry for automakers, including M&M. The company has taken three price hikes between January and June 2021, but the entire cost inflation has still not been passed on, say analysts. Given the disruptions by COVID-19 pandemic in the second wave (April-May) and a possibility of a third wave, it may not be entirely possible to pass on the entire raw material price increases on to customers. So, cost management is also going to remain a key focus for automakers.

Buoyed by the XUV700 launch, M&M shares rose 2.5 per cent on Monday, while the broader Sensex traded 0.4 per cent higher. As of close on August 13, the stock has gained 8 per cent so far this year, underperforming the broader BSE Sensex, which is up 16 per cent. But analysts largely remain bullish on the company.