Home-grown automaker, Mahindra & Mahindra expects rural demand to return starting June-July this year, as the COVID-19 fear recedes in rural areas and basic fundamentals of the rural economy regains strength.
The company announced its financial results for FY21 on May 28, 2021.
Responding to a question from Mobility Outlook, Rajesh Jejurikar, Executive Director (Auto & Farm Sectors), Mahindra & Mahindra said all the basic fundamentals of the rural economy are very strong. “We think the fear of COVID is receding in the rural areas. However, the cases this year are much higher than the last year but we see the confidence coming back,” he said.
Strong rabi crop prices are holding up and there is expectation of a third good consecutive monsoon. Alongside, increased government spending on rural areas are some strong indications that rural demand will come back.
Jejurikar expects tractor demand to return from June and auto and rural demand from July.
The automaker’s tractor business recorded its highest ever revenue in Q4FY21, up by 60%. Auto sales too remained robust as it recorded a 43% jump in revenues backed by demand for products like Thar, XUV300, Bolero and Scorpio.
In total, the company sold 93,044 tractors in Q4FY21, up by 58% when compared to 58,817 units in the same period a year ago.
According to India Rating and Research Agency, with rising COVID-90 infections, households in rural areas would be more concerned about the rising or an expected rise in health expenditure and would cut down on non-essentials. Other than this, decline in non-agricultural activities of carpenters, blacksmiths as well as auto/tractor/cycle repair, construction, transport and storage is a cause of concern.
So, despite record agriculture produce, the rating agency expects rural demand to be muted.
INR 17,000 crore CAPEX To Bring 60 New Vehicles
By FY25, Mahindra & Mahindra will be investing INR 3,000 crore to launch over 37 tractors based on four platforms. According to the company, these tractors range from 20-25 hp to 45-70 hp and will be launched in four geographies.
On the automotive front, the company has lined up an INR 6,000 crore investment to upgrade its existing line-up and launch nine products in the SUV segment to fight back competition. In addition, 14 new light commercial vehicles are lined up for launch by 2026, which will also include six electric vehicles – four last-mile mobility products, an electric Jeeto cargo van and a goods and passenger-carrying pick-up too.
Apart from investments in the farm and auto segment, the company has earmarked a fresh investment of INR 3,000 crore in electric vehicles, while INR 5,000 crore has also been lined up as investments in group companies.
Overall, the company plans to invest a total of INR 17,000 crore in capital expenditure in the next three years.
M&M and Mahindra Vehicle Manufacturers (MVML) recorded a PAT of INR 163 crore in the last quarter of FY21, against the net loss of INR 3,255 crore it incurred in the quarter a year ago. In terms of revenue, it posted a growth of 48%, closing Q4FY21 with INR 13,338 crore, as against INR 9,005 crore in the same period a year ago.