Two Indian automobile giants have announced massive price cuts on their flagship SUV models to boost demand amid a slump in car sales.
On July 10, 2024, Mahindra & Mahindra announced a price cut for its Sports Utility Vehicle (SUV), on an ex-showroom basis the XUV700 by 10 percent from Rs. 21.5 lahks to Rs. 19.5 lakhs.
The new pricing was been introduced ahead of the XUV700’s third anniversary and will be effective for a limited period of four months starting July 10. The XUV700 became Mahindra’s fastest car to reach sales of more than 1.5 lakh units within 30 months of launch.
In efforts to boost sales, even Tata Motors has also implemented price cuts on its SUVs, the Harrier and Safari, effective until July 31. The price of the Harrier has been cut to Rs. 15 lakh from Rs. 15.5 lakh, while the price of the Safari has been cut from Rs. 16.2 lakh earlier to Rs.15.5 lakh.
The price cuts are a direct response to the piling up of unsold inventory at auto dealerships, which has reached around Rs. 60,000 crores. The automakers are trying to clear this inventory through aggressive discounting.
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According to reports, analysts interpret these price reductions by major players as indicative of weakened demand in the segment.
They attribute this trend to reduced inquiries and postponed vehicle purchases, exacerbated by extreme heat waves affecting consumer behaviour. Moreover, extreme heat also resulted in 15 percent less walk-ins at dealerships.
Additionally, as per reports, the Commercial Vehicle (CV) sales volumes are expected to register a degrowth of 3 to 6 percent in FY25 due to a slowdown in demand in both the Medium and Heavy Commercial Vehicle (MHCV) and Light Commercial Vehicle (LCV) segments, as well as high inventory levels with dealers.
Moreover, the muted growth in FY24 was mainly due to the high base of FY23, the transition to BS VI leading to higher vehicle costs and a slowdown in infrastructure projects amidst elections during the latter part of the year leading to higher inventory with dealers.
However, during H2FY25 the CV sector is expected to exhibit recovery due to anticipated GDP growth, ongoing infrastructure projects and potential interest rate cuts.
Looking at the financial statements of Mahindra & Mahindra, the revenue increased marginally by 0.4 percent from Rs. 35,299 crores during the December quarter to Rs. 35,452 crores in the March quarter. In addition, the net profits increased by 5 percent from Rs. 2,977 crores to Rs. 3,125 crores during the same period.
The automotive segment, which includes commercial vehicles and passenger vehicles, contributed 54.7 percent of the company’s total consolidated revenue in FY24.
The Indian carmaker recorded a sales number of 40,022 units for its domestic passenger vehicle market in June 2024, a 22.8 percent growth in sales from June last year, which stood at 32,588 units.
As compared to the numbers from May 2024, the Mahindra monthly sales in June 2024 dropped by 7.4 percent from 43,218 units.
Coming onto the financial performance of Tata Motors, the revenue increased by around 9 percent from Rs. 110,577 crores during the December quarter to Rs. 119,986 crores in the March quarter. In addition, the net profits magnified by 145 percent from Rs. 7,145 crores to Rs. 17,529 crores during the same period.
The management of Tata motors remains cautiously optimistic about domestic demand over the full year and expects H1 to be relatively weaker.
The domestic passenger vehicle (PV) sales of Tata Motors, including electric vehicles (EVs), declined 8 percent year-over-year to 43,524 units in June 2024 compared to 47,235 units in June 2023.
Overall, the automotive sector’s growth momentum is expected to moderate in FY25 compared to the robust trends seen in FY23 and FY24, largely due to varied base levels across segments. However, the industry remains poised for growth amidst a mix of optimism and challenges.
Written By Vaibhav Patil
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