Shares of Mahindra & Mahindra (M&M) took a significant hit recently, dropping 6.4% in early morning trade to ₹2736 apiece. This comes on the heels of the company slashing prices on its top XUV700 variant, the AX7, by up to ₹2 lakh. Let’s delve into the details to understand what’s driving this stock movement and the broader implications for the SUV market.
Xuv700 ax7 price cut: A strategic move?
M&M announced a temporary price reduction for the XUV700 AX7, effective from July 10 and lasting for four months. The company framed this decision as a way to celebrate the third anniversary of the XUV700 and make the feature-rich AX7 trims more accessible to buyers.
The new pricing sees the AX7 Petrol-MT 6-str now starting at ₹19.69 lakh, down from ₹21.54 lakh—a reduction of ₹1.85 lakh. This move aims to boost sales and allow more consumers to experience the XUV700’s premium features at a more affordable price.
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Stock market reaction: Why the dip?
Despite the positive spin on the price cut, the stock market reacted negatively. M&M’s share price dropped by over 7.30% on the BSE, falling from ₹2,925.80 to a low of ₹2,711.75. This sharp decline can be attributed to investor concerns about the underlying reasons for the price reduction.
Investor concerns: Excess inventory?
Analysts suggest that the price cut may signal excess inventory in the auto industry. While M&M attributes the reduction to the XUV700’s anniversary celebration, some market experts believe that the move is an attempt to clear unsold inventories. This interpretation is causing concern among investors, leading to the dip in stock price.
Broader market trends: SUVs facing a slump?
M&M isn’t the only automaker reducing prices. Tata Motors also cut prices on its SUVs, the Harrier and Safari, indicating a potential trend of weakened demand in the segment. Analysts link this trend to reduced inquiries and postponed vehicle purchases, exacerbated by extreme heat waves affecting consumer behavior.
M&M’s impressive sales performance
Despite the current market turbulence, M&M has shown strong performance in recent years. The XUV700 became the fastest Mahindra vehicle to achieve over 1.5 lakh sales within 30 months of launch. In FY24, M&M’s SUV revenue market share grew by 130 basis points year-on-year to 20.4%, driven by a record sales performance with 459,877 units sold.
Flagship products driving growth
M&M’s popular models, including the Scorpio, Thar, XUV700, and Bolero, continue to bolster the company’s position in the UV segment. The company has also expanded its UV product portfolio with models like the XUV300, Bolero Neo, Bolero Power Plus, and Thar, attracting lower tax rates due to their specifications.
International success
Internationally, M&M’s XUV700 has gained significant traction, particularly in Australia, contributing to a substantial increase in retail sales. In South Africa, the Scorpio-N ranks among the top SUVs in the body-on-frame segment, while the XUV300 in Tunisia won the Golden Wheel 2023 award for “Best Seller in its Segment.”
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A year of strong growth
In FY24, M&M achieved total sales of 824,939 vehicles, marking an 18.1% growth compared to the previous year’s 698,456 vehicles. In the domestic market, M&M sold 800,276 vehicles, reflecting a robust growth of 20.1%.
Yearly performance: (Amount in lakhs)
| Annual | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
| Sales | 98,763 | 84,960 | 57,445 | 45,040 | 45,487 |
| Other Income | 4,141 | 2,545 | 2,075 | 1,221 | 1,667 |
| Total Income | 102,904 | 87,505 | 59,521 | 46,262 | 47,155 |
| Total Expenditure | 89,282 | 79,101 | 53,063 | 44,431 | 43,926 |
| EBIT | 13,621 | 8,403 | 6,458 | 1,831 | 3,229 |
| Interest | 138 | 272 | 223 | 370 | 113 |
| Tax | 2,765 | 1,582 | 1,300 | 1,191 | 1,785 |
| Net Profit | 10,717 | 6,548 | 4,935 | 268 | 1,330 |
UV segment performance
Within the passenger vehicle (PV) segment, M&M recorded sales of 459,877 vehicles, including 459,864 utility vehicles (UVs). This marked a significant increase from the previous year’s sales volume of 359,253 vehicles. The UV segment, where M&M has a strong presence, showed robust growth of 25.8%.
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Market performance and stock history
Despite the recent dip, M&M’s stock has shown impressive performance over the past year. The stock soared by 67.66% in the last six months and 76.37% over the past year. Even with the recent decline, the stock’s three-year returns stand at an impressive 200.53%.
Short-term volatility
The stock’s recent decline was accompanied by a slightly below-average trading volume of 4,555,834 shares, compared to the 7-day average volume of 4,638,725 shares. The 6-month Beta of 1.47 indicates a moderate level of volatility relative to the market.
Conclusion: A mixed bag
M&M’s recent price cut on the XUV700 AX7 has sparked a notable decline in its stock price, reflecting investor concerns about potential excess inventory and weakened demand in the SUV segment. However, the company’s strong sales performance, both domestically and internationally, underscores its resilience and market leadership.
As M&M navigates these market dynamics, it remains to be seen how the price reduction will impact its overall sales and market position in the coming months. For investors, the key will be to monitor how M&M manages its inventory and continues to innovate within the competitive SUV market.
