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M&M plans to launch five electric sport utility vehicles (SUVs) under the XUV and BE brands and they will share a common platform, the INGLO. Four of these vehicles are likely to be launched between 2024 and 2026. In the near term, M&M believes it will be able to price its EVs competitively in terms of total cost of ownership given the tax arbitrage between internal combustion engine vehicles and EVs. said at a recent investor meeting organized by Kotak Institutional Equities. It also pointed out that utility vehicle buyers are not price sensitive and thus, 20-30% of its SUV portfolio is likely to be electric by FY27. But a significant ramp-up of charging infrastructure is critical to achieving such penetration levels.

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Analysts are gung-ho about M&M’s prospects due to a robust product pipeline and robust order book. The automaker’s new launches have been well received. At Kotak’s investor meeting, M&M management highlighted that its domestic utility vehicle segment has received over 240,000 bookings, of which over 100,000 are for the Scorpio-N and 70,000 for the XUV700.

However, supply chain constraints are limiting the ability to meet such solid demand. “The company highlighted that 10-12% of production has been affected due to shortage of electronic components from China, which is expected to improve in the coming weeks,” analysts at Kotak said in a report on August 18. “

Also, unfulfilled orders remain a major pain point due to limited capacity with the Scorpio N capacity at around 6,000 units per month, said Varun Baki, analyst at Normal Bang Equities in a Q1FY23 review report. “A waiting period of 1 year plus will involve a lot of order duplication and may lead to last-minute cancellations. Thus, we remain conservative and our numbers for FY23 include around 55-per cent of the current order book. 60% convert,” he said.

M&M’s goal is to increase capacity. It will also help in regaining market share in the domestic utility vehicle segment.

Aniket Mahatre, analyst, HDFC Securities said, “The stock could see further re-rating based on how fast M&M can ramp up production to meet strong demand and if the company sustains market share growth. keeps.”

The outlook for M&M’s farm equipment segment is murky. The company expects the tractor industry to grow by just 3-5% in FY23. Unfavorable terms of trade for farmers and reduced government spending in agriculture and rural areas are key issues. However, normal rains hold good, and the company will stand to benefit from a potential pickup in the rural economy.

Further, softening commodity costs help on the margin front and its benefits can be expected to accrue from H2FY23 onwards. Margins for new products in the auto segment may be lower initially due to aggressive introductory pricing. However, this will lead to improvements in scale, cost containment measures and rising prices.

M&M’s shares are up 56% in the past year, suggesting investors are focusing on a brighter picture. Rising cancellation rates or lower-than-expected volumes for its new models will dampen investors’ hopes. In addition, the implementation of its EV strategy needs to be closely monitored.