Mahindra speed ebbs after demonetisation

 

Mahindra &Mahindra

  Demonetisation has brought to naught the double-digit growth at the country’s third largest passenger vehicle company, Mahindra & Mahindra.

 

The Mumbai-headquartered company had grown its domestic volumes by 12 per cent in the first seven months (April-October) of FY17, higher than the industry growth of 11 per cent. However, its growth in the April-February period is down to one per cent while the industry is cruising at a little over nine per cent.

Interestingly, the utility vehicle (UV) segment, where M&M is the largest player, has grown by a much higher rate of about 30 per cent in the first 11 months of the financial year. However, this has come from Maruti Suzuki and Hyundai, on the back of their top-selling SUVs, the Brezza and Creta, respectively.

M&M gets a little more than a third of its UV sales from the rural and semi-urban markets. Here, the impact of demonetisation was more pronounced, with the limited banking infrastructure and large dependence on cash transactions. “The impact of demonetisation, especially on traders and the self-employed community, tightening of automobile loans by NBFCs (non-bank financing companies) and banks have been felt, affecting sales from November onwards,” said Pravin Shah, president and chief executive (automotive) at M&M.

In the seven months ended October 2016, the company sold 140,236 passenger vehicles (PVs), an improvement of 12 per cent over the corresponding period of FY16. The company said its volumes rose in the first half of the financial year with rural recovery, better traction in existing power brands and an upward trend in newer products. “During October, we had our highest-ever retail numbers,” said Shah.

After demonetisation in early November, monthly PV volumes at M&M have continued to decline. Its April-February volume has grown by only one per cent, to 210,778 vehicles.

“We expect to end FY17 with positive growth and look forward to higher growth plans in FY18,” added Shah. “The UV segment would continue to post high growth, compared to any other segment in the PV segment.”

The overall PV industry has also seen some softening in the growth after demonetisation. Accordingly, the 11 per cent growth in April-October has come down to a little over nine per cent. Maruti Suzuki, the biggest, maintained its growth in both the pre and post demonetisation periods, at close to 11 per cent. Hyundai, the second biggest, has seen growth soften from 7.8 per cent to 4.9 per cent.

Shah said M&M has seen the situation easing, with cash coming back to rural and semi-urban markets, leading to higher footfalls from mid-February. “We are expecting full normalcy to return by the first quarter of FY18,” he added.