Mahindra & Mahindra clarifies price reduction for XUV700 not linked to UP's EV policy

ETAuto Desk ETAuto Desk | 07-11 00:20

Mahindra XUV700
Automaker Mahindra & Mahindra has clarified that the recent price reduction for its XUV700 variants is not connected to Uttar Pradesh's electric vehicle/hybrid vehicle policy. The company stated this move aligns with its business strategy, aimed at lowering the average price point to promote growth, as detailed in a February 2024 analyst meeting.

The company emphasized that the price cut is part of a broader strategy. In a filing with the stock exchange, it noted, "The announced price cut of XUV700 is a continuation of our business strategy execution that was articulated in our 14th February 2024 analyst meeting where we clearly outlined that we have to bring the average price point down to drive growth."

Mahindra & Mahindra also highlighted specific actions linked to this strategy. "We kickstarted this effort with the launch of AX5 select variant in May 2024 and have also brought in a 3rd anniversary celebration variant for the higher-end XUV700 for a limited period of 4 months," the company said.

According to the company, these actions were thoroughly planned in its business strategy, based on earlier material cost savings. "These are 'well deliberated' actions which were incorporated in its business plan based on the material cost savings it realized earlier."

Despite the clarification, shares of Mahindra & Mahindra saw a significant decline. As of 2:15 PM, shares were down approximately 7%, while benchmark indices were down 0.8%.

Brokerage firm Axis Capital shared its insights on Mahindra & Mahindra's performance and outlook. "We note that the overall volume of XUV700 has been around 6,000/month (15% of M&M's overall SUV volume), and as per our understanding, the Top 2 trims of the model (AX7 and AX7L) account for around 50-60% of volume,” said Axis Capital in a report. The firm continues to rate M&M with an ‘add’ recommendation and a target price of Rs 3,150, expressing a positive outlook for the company in the sector.

Uttar Pradesh's recent electric vehicle policy is another development in the automotive market. The state, India's second-largest car market, has waived registration fees for strong hybrid and plug-in vehicles, thereby reducing their ownership costs by 10%. While electric vehicles are taxed at 5%, hybrids face a 43% tax.

This policy shift has benefited companies like Maruti Suzuki, whose shares experienced a surge following the news. Previously, vehicles priced above INR 10 lakh incurred a 10% registration charge, which has been eliminated as of July 1, leading to price reductions between INR 1.5 lakh and INR 3 lakh depending on the model and variant, according to a sales manager at a Maruti showroom in Noida.

Mahindra & Mahindra also commented on this policy development, stating, "We firmly believe that hybrid is an interim and costly solution. And, we have the readiness to offer high quality products for all solutions that our consumers desire."

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