New Delhi: Mahindra & Mahindra (M&M), which is gearing up to introduce its battery electric vehicle (BEV) portfolio in Q4 of the ongoing financial year, on Thursday, said it is “not going to ignore internal combustion engine (ICE)” vehicles. Alongside, the company also shared its plans of adapting the hybrid technology if it deems fit.
“ICE continues to be an important part of the portfolio, and will continue to be important for consumers over the next 5-7 years,” Anish Shah, Managing Director & CEO, M&M, told the reporters during the post-earnings media call.
The company has deployed INR 27,000 crore for the automotive business expenditure over the next three years. This includes INR 14,000 crore for ICEs and INR 12,000 crore for EVs from FY25- FY27. About INR 1,000 crore will be spent on other sub segments. Out of the INR 14,000 crore for ICEs, about INR 8,500 crore is invested for SUVs, INR 4,000 crore for commercial vehicles (CVs) and INR 1,500 crore for sustenance.
However, from FY27 onwards its spending on ICE will depend on how quickly EVs ramp up. “At that point, we will assess whether the ICE makes sense or not based on what happens over the next three years.” Currently, Mahindra sells just one product in the EV portfolio– XUV400.
Talking about allocating a higher sum for ICEs than EVs, Rajesh Jejurikar, Executive Director & CEO (Auto and Farm Sector), M&M, said, “The ICE segment is growing at a healthy rate, and we make very good financial returns in the current portfolio that we sell. So it makes sense for us to stay invested in a business where our brands are strong.”
Globally, the demand for EVs has been slowing but Mahindra sees no change in its long-term projections and is even confident that the company can take a premium spot in SUV volumes in the country for electric powertrains. Mahindra has earlier stated that it aims for EVs to be 20%-30% of its SUV portfolio by 2027.
“India’s passenger vehicle industry is still at 2% penetration in EVs, and we haven’t really seen the born-electric momentum in India yet. Once it comes in, you will see how it redefines the entire EV play,” Shah said. The company has been working on its born-electric Inglo platform and is currently “at an advanced stage of validation and starting the production.” It is targeting a market launch for its BEV portfolio during January- March 2025 period.
“Going from 2% to about 20% EV penetration is not too much of an issue. As we hit the 15%-20% mark, development of the EV ecosystem is going to help take it further from there,” he added.
Consideration for hybrids
Shah said he views hybrids as an extension of ICEs– a separate but slightly different powertrain. “At this point in time, we feel good about the focus on EVs but from a consumer demand standpoint, if that becomes a bigger factor, we will be ready for hybrids too. We are looking at hybrid technology closely and we will continue to adapt as it moves on.”
However, he added that while hybrid vehicles may have some benefit from a fuel efficiency standpoint, it is still very marginal. “Hybrids are more expensive to build because there are two powertrains in a car.”
Last month, Union Minister Nitin Gadkari urged the finance minister to reduce the goods and service tax (GST) on hybrid vehicles to 12%. India currently levies a goods and service tax (GST) of 28% on vehicles powered by ICEs, including hybrids, and 5% on EVs. However, with the inclusion of cess, the tax on hybrid vehicles is over 43%, depending on the model. Automakers like Maruti Suzuki, Toyota Kirloskar, and Honda Cars sell hybrid vehicles in their portfolio.
Q4 FY24 performance
Mahindra reported a growth of 4% in its consolidated net profit at INR 2754 crore during the quarter ended March 2024. The company reported a profit of INR 2637 crore during the corresponding period of last year. The company’s total income from operations during Q4 FY24 stood at INR 35,451.73 crore as against INR 32,455.65 crore in Q4 FY23.
Manoj Bhat, Group Chief Financial Officer, M&M said, “Our disciplined capital allocation and sharp focus on operating metrics helped generate record cashflows in FY24. We also repaid debt of INR 3.1k cr. and delivered RoE of 18.4%. Through these steps, we have built a foundation to support the next phase of our growth.”
For the full year FY24, its consolidated net profit grew 25% at INR 11,269 crore as against INR 9,025 crore in FY23. Revenue was up 15% at INR 1.39 lakh crore in the year ended March 2024 when compared to INR 1.21 lakh crore in corresponding period of last year.
The company said its board has approved a dividend of INR 21.10 per share of the face value of INR 5 each.
Product plans
By 2030, the automaker plans to bring in 9 ICE SUVs, 7 BEVs and 7 LCVs. In the ICE segment, the plan is to launch 6 new SUVs and 3 lifecycle upgrades, one of which was introduced last month– XUV 3XO. Mahindra believes its “design” and “technology” will play a key role in differentiating itself from the competition.
It is also actively looking at cell localization. “There are conversations that we are having with a company in that space. No final workout or conclusion has been done though.”
On Wednesday, Mahindra claimed to have received 50,000 bookings for the new XUV 3XO in just an hour. Deliveries are set to begin from May 26. The company has currently produced 10,000 units and has a capacity to make 9,000 units per month in the upcoming months.
The automaker aims to increase the total capacity to 64,000 units a month in FY25 from 49,000 units in FY24. Mahindra will add 15,000 units in its monthly production capacity by end of March 2025. The increase in capacity will happen for SUVs including 5-door Thar, XUV3XO and XUV4OO to 5,000 units and for EVs to 10,000 units. Further, the plan is to grow the monthly production capacity to 72,000 in FY26, with an addition of 8,000 units per month.
For FY25, the automaker expects to grow in “mid-to-high teens”, and the growth will be higher than the industry.
Investments and funding
Going forward, Mahindra’s EV division– Mahindra Electric Automobile Ltd (MEAL) expects to generate sufficient operating cash to satisfy its capital investment needs. Earlier, the automaker has received investments of about INR 1200 crore from British International Investment (BII) and INR 300 crore from Singapore-based Temasek for MEAL.
Shah said M&M and BII have mutually agreed to extend the timeframe for the final tranche of BII’s planned investment of INR 725 crore, and will jointly assess whether additional investment is required by December 31, 2024. Temasek will invest the balance of INR 900 crore as per agreed timelines.
