M&M says growing competition to hit market share

Mah N Mah

Mahindra and Mahindra Ltd, India’s biggest sports utility vehicle (SUV) manufacturer, warned that growing competition would erode its market share after posting a forecast-beating rise in quarterly net profit.

“With so much competition in SUVs now, market share is bound to go down,” Pawan Goenka, president of Mahindra’s automotive and farm equipment sectors, said on Thursday.

The flagship company of the $15.9 billion Mahindra Group builds every other SUV sold in India, but saw its share of the segment fall to 48 percent in its fiscal year 2012/13 from 56 percent a year earlier.

Mahindra will soon compete with automakers including Ford Motor Co(F.N) and Japan’s Suzuki Motor Corp which plan to launch SUVs in India during the current year. Another rival is set to come from Nissan Motors and Maruti Suzuki India Ltd(MRTI.NS).

“The competitive intensity is something which is likely to go up, so to avoid losing market share it depends how fast Mahindra is able to launch new products,” said Ajay Shethiya, analyst at Mumbai-based brokerage Centrum.

Shethiya expects the company’s SUV business to grow by between 8 and 10 percent in 2013/14.

Mahindra’s net profit for its fiscal fourth quarter reached 8.89 billion rupees, against 8.74 billion a year earlier on a 12 percent rise in net sales to 103.5 billion.

Analysts had on average expected a profit of 7.62 billion rupees on revenue of 99.86 billion, according to data from Thomson Reuters Starmine.

Mahindra said automotive sales, including exports, jumped 17 percent in the year ended March 31, as strong demand for its SUVs helped defy the gloom in much of India’s car market.

Car sales in India fell an annual 6.7 percent in the 12 months to March 31, their first fall in a decade, and are expected to grow just 3 to 5 percent this year, down from an original forecast of 10 to 12 percent, an industry body has said.

Mahindra, which controls South Korean car maker Ssangyong Motor Co Ltd, said it plans to invest 75 billion rupees in its business over the next three years.

Shares in Mahindra, valued at around $10.5 billion by the market, ended 4.5 percent higher at 1,004.65 rupees in Sensex.

Source : Reuters.


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