Why M&M Share Price is Falling

In the high-stakes game of cricket, one missed catch or a single misfielding can turn the tide of the entire match. Similarly, in the fast-paced world of the stock market, even a seemingly minor piece of bad news can disrupt the upward trajectory of even the most established companies.

Mahindra & Mahindra (M&M), a titan of the Indian auto industry, exemplifies this principle.

Despite rising 73.3% over a year and 59.7% in 2024 so far, M&M's recent rally hit a speed bump.

The company's share price dropped 5% in the past five days following a specific announcement. Let's delve into the details of this announcement and explore the potential reasons behind this sudden shift in M&M's stock market performance.

#1 Price Cut

M&M announced a significant price reduction for its compact crossover SUV, the XUV700. The price of the top XUV700 variant, AX7, is cut by Rs 0.2 million (m), reducing the price from Rs 2.2 m to Rs 1.9 m.

This new pricing is part of a limited-time offer, effective for four months starting 10 July. The price reduction coincides with the third anniversary of the XUV700, aiming to boost sales and make the feature-rich AX7 trims more accessible to a broader range of customers.

M&M clarified that the price cuts for certain XUV700 variants are not linked to the recent waiver of registration fees for hybrid vehicles by the Uttar Pradesh government.

The company's management stated that the price cuts were implemented to remain competitive against higher discounts offered by peers and to respond to weak retail demand.

The company also stated that these are special prices applicable only for the next four months and that they were well deliberated and incorporated into the annual business plan.

The company emphasised that material cost savings realised earlier have allowed them to implement these cuts without expecting a significant impact on their financials.

#2 Probability of Slow Demand

Industry experts interpret the price cuts as a signal of weakening demand for SUVs. The reduction in the XUV700's price suggests that the company is attempting to stimulate sales in a market that is facing demand pressure.

Tata Motors also cut the prices of its SUVs, the Harrier and Safari, until 31 July 2024. The price of the Harrier has been reduced to Rs 1.5 m from Rs 1.6 m, the price of the Safari was also brought down.

When two major players in the industry, M&M and Tata Motors, announce price cuts, it raises concerns about a potential slowdown in demand.

The overall volume of the XUV700 has been around 6,000 units per month, accounting for 15% of M&M's total SUV volume. Additionally, extreme heat has contributed to a 15% reduction in walk-ins at dealerships, further impacting sales. Industry-wide, the passenger vehicle segment has experienced a decline, with sales in June falling 6.8% year-on-year and 7.2% month-on-month, according to reports.

These indicators suggest that the automotive market, particularly the SUV segment, is currently facing significant challenges.

What Next?

M&M has outlined significant future plans, emphasising a substantial increase in investments and capacity expansion across various segments.

The company plans to deploy Rs. 370 billion (bn) over the next five years, with a focus on the auto and EV segments. Auto will receive Rs 270 bn, including Rs 120 bn for EVs and Rs 140 bn for ICE vehicles.

The company aims to introduce 9 new ICE SUVs (3 mid-cycle refreshes and 6 all-new) and 7 new electric vehicles (BEVs) by 2030. Additionally, M&M plans to launch 7 new LCVs, including 2 electric models.

Its capacity will rise from 49,000 units to 64,000 units by the end of FY25, driven by new models such as the Thar 5-door, XUV 3XO, and the first batch of BEVs.

Investments are focused on the Zaheerabad plant to boost electric three-wheeler production. The penetration of this category is expected to grow from 11% to 40-50% in the foreseeable future.

How M&M Share Price has Performed Recently

In the past five days, M&M share price tumbled 4.6%. In the last month, it is down 4.1%.

In 2024, so far its share price is up 59.6% and it surged 73.3% in the last year.

The stock touched its 52-week high of Rs 3,013.9 on 18 June 2024 and a 52-week low of Rs 1,418.6 on 4 August 2023.

About M&M

Mahindra & Mahindra (M&M) is the flagship company of the Mahindra group, which consists of diverse business interests across the globe.

It operates through the following segments: automotive, farm equipment, and others. The automotive segment comprises of sale of automobiles, spare parts, and related services.

The farm equipment segment involves the sale of tractors and spare parts. The others segment includes agri, construction equipment, powerful, and spares business units.

It is one of the most reputed brands in India for automobiles. Since its inception in 1945, the company has been going strong, with its cars among the most trusted and most reliable cars in the market.

For more details about the company, you can have a look at Mahindra & Mahindra's factsheet and quarterly results on our website.

You can also compare Mahindra & Mahindra with its peers.

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