Mahindra & Toyota Drive SUV Boom Amid Industry Challenges

Mahindra & Toyota Drive SUV Boom Amid Industry Challenges
In 2024, India’s automotive industry has witnessed significant shifts, with Mahindra & Mahindra and Toyota Kirloskar Motor achieving record sales despite prevailing challenges. This trend underscores the evolving dynamics of the Indian car market, characterized by a growing consumer preference for SUVs and strategic adaptations by manufacturers.

Mahindra & Mahindra’s Performance
Mahindra & Mahindra has experienced a remarkable surge in sales, particularly in the SUV segment. In October 2024, the company reported its highest-ever SUV sales, delivering 54,504 vehicles—a 25% year-over-year increase compared to the same month in 2023.
NDTV
This achievement marks the second consecutive month of record-breaking sales for Mahindra, reflecting its successful alignment with consumer preferences favoring larger vehicles.

The company’s robust performance is further evidenced by its financial results. In the second quarter, Mahindra reported a 13.2% rise in profit to ₹38.41 billion, surpassing analysts’ expectations. This growth is attributed to higher SUV sales and a recovery in tractor demand, with SUV volumes rising by 19% despite industry-wide challenges.
Reuters

Toyota Kirloskar Motor’s Performance
Toyota Kirloskar Motor has also demonstrated impressive growth. In October 2024, the company reported a 41% year-over-year increase in sales, delivering 30,845 units. Domestic sales accounted for 28,138 units, while exports contributed 2,707 units.
The New Indian Express
This performance highlights Toyota’s strong market presence and its ability to meet the rising demand for SUVs in India.

Market Dynamics and Consumer Preferences
The Indian automotive market has been increasingly dominated by SUVs, with consumers showing a clear preference for these vehicles over smaller cars. This shift is evident in the sales figures of major manufacturers. For instance, Maruti Suzuki, traditionally known for its small cars, reported a 19.4% increase in SUV sales in October 2024, achieving record-high figures in this segment.

This trend towards SUVs is driven by several factors, including the perception of better safety, higher ground clearance suitable for diverse Indian terrains, and a growing aspirational value associated with owning larger vehicles. Manufacturers like Mahindra and Toyota have capitalized on this shift by expanding their SUV portfolios and introducing models that cater to the evolving preferences of Indian consumers.

Industry Challenges
Despite these successes, the industry faces challenges, including fluctuating demand and inventory management issues. In September 2024, dealer inventories reached critically high levels of up to 85 days, prompting concerns about overstocking. However, the festive season in October helped reduce these inventories to more manageable levels, as manufacturers and dealers offered promotions to boost sales.

Additionally, the industry has been navigating the transition towards electric vehicles (EVs) and adhering to stricter emission norms. While the demand for EVs is gradually increasing, the current market is still predominantly driven by internal combustion engine vehicles, particularly SUVs. Manufacturers are balancing the need to invest in future technologies with the immediate demand for conventional vehicles.

Strategic Implications for Investors
For investors, the strong performance of Mahindra & Mahindra and Toyota Kirloskar Motor indicates a positive outlook for companies with a robust SUV lineup and the ability to adapt to market trends. Mahindra’s consistent growth in SUV sales and its strategic positioning in the agricultural sector through its tractor business provide a diversified revenue stream, enhancing its investment appeal.

Toyota’s emphasis on quality and its expanding portfolio in the Indian market also make it a noteworthy player. Its ability to achieve significant sales growth amidst industry challenges reflects operational efficiency and market adaptability.

However, investors should remain cognizant of the broader industry challenges, including inventory management and the ongoing transition to EVs. Companies that effectively navigate these challenges while aligning with consumer preferences are likely to sustain growth and offer favorable returns.

Conclusion
The record sales achieved by Mahindra & Mahindra and Toyota Kirloskar Motor in 2024 underscore the dynamic nature of the Indian automotive market. The growing consumer preference for SUVs has been a significant driver of this growth, with manufacturers that align their strategies accordingly reaping substantial benefits. While challenges persist, the ability to adapt to market trends and manage operational complexities will be crucial for sustained success in this evolving industry landscape.

The image added is for representation purposes only

Indian Auto Components Industry Grows 11.3% in H1 FY25

The Indian auto components industry has demonstrated robust growth in the first half of the fiscal year 2024-25 (H1 FY25), achieving an 11.3% increase in market size compared to the same period in the previous year. According to a report by the Automotive Component Manufacturers Association (ACMA), the industry’s valuation rose from USD 36.1 billion in H1 FY24 to USD 39.6 billion in H1 FY25.

Market Dynamics and Consumer Preferences
Several key trends have contributed to this growth, reflecting evolving consumer preferences across various vehicle segments:

Passenger Vehicles (PVs): There has been a notable shift towards larger vehicles, particularly Utility Vehicles (UVs). The UV segment experienced a 13% increase in demand, with UV1 models—vehicles measuring between 4,000 to 4,400 mm in length and priced under ₹20 lakh—seeing a substantial 25% surge in sales.

Two-Wheelers: The market for motorcycles with higher engine capacities has expanded significantly. Sales of motorcycles with engine capacities ranging from 350cc to 500cc soared by 74%, indicating a consumer preference for more powerful two-wheelers.

Electric Vehicles (EVs): The EV segment exhibited mixed results. Overall EV sales increased by 22% in H1 FY25 compared to the same period last year. Electric two-wheelers (e-2Ws) led this growth with a 26% rise in sales. However, electric passenger vehicles (e-PVs) experienced a 19% decline in sales, suggesting potential challenges in consumer adoption or market offerings in this sub-segment.

Factors Driving Growth
The industry’s growth can be attributed to several factors:

Economic Recovery: Post-pandemic economic recovery has bolstered consumer confidence, leading to increased spending on automobiles and, consequently, auto components.

Government Initiatives: Policies promoting manufacturing and the adoption of electric vehicles have provided a conducive environment for industry expansion.

Technological Advancements: The integration of advanced technologies in vehicles has increased the demand for sophisticated auto components, contributing to market growth.

Challenges and Considerations
Despite the positive trajectory, the industry faces certain challenges:

Supply Chain Disruptions: Global supply chain issues, including semiconductor shortages, have impacted production schedules and could pose risks to sustained growth.

EV Adoption Barriers: The decline in e-PV sales highlights potential obstacles in the electric vehicle market, such as inadequate charging infrastructure, higher upfront costs, or limited consumer awareness.

Outlook
The Indian auto components industry is poised for continued growth, supported by favorable economic conditions and evolving consumer preferences. However, addressing supply chain challenges and enhancing the ecosystem for electric vehicles will be crucial for sustaining this momentum.

In conclusion, the 11.3% growth in H1 FY25 underscores the resilience and adaptability of the Indian auto components industry amid changing market dynamics and consumer behaviors.

The image added is for representation purposes only

Auto Industry Nears ₹25,000 Cr Import Reduction Target

The Indian automotive industry is on course to achieve its ambitious goal of reducing imports by ₹25,000 crore (approximately $3 billion) by the end of the current fiscal year. This initiative focuses on increasing the localization of advanced components such as electric motors, airbags, and automatic transmissions. Industry assessments indicate that significant progress has been made, with further advancements anticipated in the coming years.

Localization Efforts and Achievements
In an effort to reduce dependency on imports, the Society of Indian Automobile Manufacturers (SIAM) and the Automotive Component Manufacturers Association (ACMA) have spearheaded localization programs targeting 11 critical categories, including drive transmissions, engines, steering systems, electronics, and electrical parts. These components account for about 70% of total imports in the sector.

Between FY20 and FY22, the industry achieved net localization gains of ₹7,018 crore. Building on this momentum, there is an ongoing effort to realize an additional ₹17,977 crore in net localization by FY25. This cumulative effort is expected to meet the ₹25,000 crore import reduction target set for the current fiscal year.

Shradha Suri Marwah, President of ACMA, highlighted the industry’s progress, stating, “Value-addition from the Indian auto components industry has gone up significantly in the last couple of years. In the first phase (till FY22), we achieved double the target of attaining localization level at about 6%. The second phase is underway. The industry is targeting deepening localization by another 15%.”
ECONOMIC TIMES

Investments and Technological Advancements
To support these localization efforts, component manufacturers are investing in new facilities and technologies. This includes the development of advanced manufacturing processes and the adoption of cutting-edge technologies to produce complex components domestically. Such investments not only reduce import dependence but also enhance the competitiveness of Indian manufacturers in the global market.

Government Initiatives and Policy Support
The Indian government has introduced several initiatives to bolster the automotive sector’s localization efforts. The Performance-Linked Incentive (PLI) scheme, for instance, aims to promote the production of electric vehicles and hydrogen fuel vehicles, with an allocation of ₹26,000 crore (US$3.61 billion). This scheme is expected to generate approximately 750,000 direct jobs in the auto sector and reduce the country’s carbon footprint.
WIKIPEDIA

Additionally, the government’s focus on developing infrastructure for electric vehicles and promoting sustainable mobility solutions further supports the industry’s localization objectives.

Impact on the Indian Economy
The localization drive is anticipated to have a positive impact on the Indian economy by reducing the trade deficit and fostering the growth of the domestic manufacturing sector. By producing critical components locally, the industry can retain more value within the country, create employment opportunities, and stimulate economic development.

Moreover, the increased focus on localization aligns with India’s vision of becoming a global automotive hub. Projections indicate that the Indian auto market is poised to reach USD 300 billion by 2026, driven by rising income levels, urbanization, and a burgeoning middle class.
ECONOMIC TIMES

Challenges and Future Outlook
While significant progress has been made, the industry faces challenges in achieving deeper localization. These include the need for substantial capital investment, development of technical expertise, and ensuring quality standards that meet global benchmarks.

To address these challenges, collaboration between industry stakeholders, government bodies, and educational institutions is essential. Such partnerships can facilitate skill development, research and development, and the creation of a robust supply chain ecosystem.

Looking ahead, the Indian automotive industry is expected to continue its localization efforts, with reassessments and the setting of new targets in consultation with the government. This ongoing commitment to reducing import dependence and enhancing domestic manufacturing capabilities positions India favorably in the global automotive landscape.

In conclusion, the Indian automotive industry’s concerted efforts towards localization are yielding tangible results, bringing the sector closer to its import reduction targets. With continued investments, policy support, and collaborative initiatives, the industry is well-positioned to achieve its goals and contribute significantly to the nation’s economic growth.

The image added is for representation purposes only