Under new CEO Anish Shah, Mahindra & Mahindra Ltd., the Indian sports utility vehicle manufacturer, best known for its tractors and farm machinery, is betting on electric cars and digital services to revive its fortunes.
Shah, 51, has a difficult job ahead of him. The $19 billion company’s SUV market share had fallen to 13% from 50% seven years ago. It has struggled with failing investments and the pandemic’s effect on the car industry, leading to its first quarterly losses in nearly two decades last year. It scrapped plans to work with Ford Motor Company last week.
All of that is in the past, according to Shah, who previously served as Mahindra’s chief financial officer. In an interview, he said, “At this stage, I’m looking at it as more of a growth storey than a turnaround storey.”
Shah is laying out a plan to resurrect the Mahindra Company, a 76-year-old conglomerate, that is leaving money-losing companies, and writing off nearly all losses as part of a restructuring. SUVs, electric vehicles, and digital start-ups will drive the company’s future growth, according to the executive, who has been with the company for seven years. Investors tend to be on board with the plan. Mahindra’s stock has risen 11% so far this year, outperforming the benchmark S&P BSE Sensex’s 3.9% gain.
With an SUV accounting for one out of every three cars sold in India, regaining market share is vital for Mahindra, which derives more than 60% of its revenue from the automotive industry. Shah is banking on its latest Thar model, a four-wheel-drive vehicle that harkens back to the Scorpio’s earlier popularity. In comparison to the lukewarm reception received by its minivan, the Marazzo, the latest model has a waiting list that extends into early next year.
“What we’ve found is that venturing outside of our hearts doesn’t make sense,” Shah said. “A core Mahindra SUV is capable of off-roading while still being elegant enough to be driven around town,” he added.
In addition, the conglomerate is betting on electric cars, which Shah believes would overtake gas-guzzlers by 2030. In the near future, he plans to invest 30 billion rupees ($408 million) in electric vehicles and launch electric versions of his SUVs, aided by the company’s 2010 acquisition of an Indian electric carmaker.
Despite Mahindra’s foresight in the EV room, the market is becoming crowded, with a slew of manufacturers ranging from Hyundai Motor Co. to Kia Motors Corp. providing zero-emission vehicles, and Tesla Inc. considering a move. However, a lack of charging infrastructure and high EV prices has hindered the switch away from combustion engines.
The recovery in India’s overall car sales may be hampered by a new wave of coronavirus outbreaks, which have prompted curfews and lockdowns in some areas. Vaccine rollout has been slow; at this pace, 75% of the population will be covered in two and a half years, potentially prolonging the market demand slump.
Mayur Milak, senior analyst at BOB Capital Markets, said, “Turnaround is possible, but it will be difficult. Mahindra needs to shake off its reputation as a “rural rugged player,” as the Indian market has shifted to premium SUVs, while budget-conscious buyers prefer compact SUVs. He said, “Mahindra can’t afford to lose focus out of the SUV segment.”
