M&M prices new XUV 5OO lower to take on rivals

After losing market share in the utility vehicle (UV) segment to competition in FY18, Mahindra & Mahindra (M&M) seems to be in fight-back mode. On Wednesday, it launched the new XUV 5OO at a much more affordable price point, perhaps with an eye on the volumes that are being garnered in the sports utility vehicle (SUV) segment by later entrants like Maruti and Hyundai whose models were priced cheaper. In fact, Maruti in FY18 has emerged as the new leader in SUVs in India. The new XUV 5OO is priced between Rs 12.32 to 17.88 lakh ex-showroom Mumbai. With this new band, the entry level XUV 5OO is now cheaper by Rs 40,000-50,000 and the top-end model by about Rs 30,000. In comparison, variants of Hyundai’s Creta and Maruti’s Vitara Brezza are priced between Rs 10-18 lakh and Rs 9-12 lakh, respectively. While the XUV 5OO has been selling about 2,500 units a month, Creta sells about 10,000 units and Vitara Brezza near 12,000 units.

M&M has already launched a facelift of Scorpio, re-positioned TUV 3OO and refreshed KUV 1OO NXT early this year, but the unveiling of XUV 5OO at the new price point on Wednesday is perhaps its most significant move yet. This coupled with the proposed launches of three new vehicles — including a compact SUV, a premium SUV and a multi-purpose vehicle (MPV) — in FY19 seem to be a part of its plan to wrest back market share. The XUV 7OO, the premium SUV, likely to be launched this fiscal, and built on the Ssangyong platform, will likely occupy the higher price point that the XUV 5OO now seems to be edging out of.

“It will be difficult to maintain the market share with competition rising but it is also where we are supposed to work,” said Rajan Wadhera, President- Automotive Sector, M&M, on the sidelines of the launch of new XUV500.

“Time has come to set trends in luxury SUV segment,” he added, clearly alluding to the automaker’s intent to reclaim its leadership position in the segment. Veejay Ram Nakra, chief of sales and marketing, Auto Division, M&M, said, “Customer choice and price points are changing rapidly and SUV is the talk of the town, with a third of the PV (passenger vehicle) sales today. New launches are very important and we have more coming up this year.” Asked if this pricing was in the line with the company’s strategy to win back the lost share, Nakra, said, “M&M’s strategy is to provide best value to its customers.” M&M has invested Rs 150 crore in the new XUV 5OO, which comes in 5 diesel variants, including an optional pack. It also has a petrol variant. Since its launch in 2011, M&M has sold a total of 2.32 lakh units of XUV 5OO. The company plans to offer both diesel and petrol versions across its product range.

“Though the new XUV 5OO pricing is competitive compared to the Hyundai Creta and Jeep Compass (Rs 16 lakh-22 lakh). We do not expect much customer turnaround as the oomph factor is still missing in it. It is a seven year old platform and there is a limit to what one can do with it,” said VG Ramakrishnan, founder partner and MD, Avanteum Advisors LLP, an advisory and consulting firm focused on key sectors including automobiles. He added that while the vehicle might be able to retain few existing M&M customers who are looking at moving up the value chain, it definitely would not bring back customers as they look at newer brands like Jeep that bring a more attractive value proposition to the market.

Furthermore, he said that M&M will have to grow at the same pace as the UV segment to keep its market share intact. New launches would be key to M&M’s UV growth story this year, he said. As per Society of Indian Automobile Manufacturers (SIAM) data released this month, M&M, which once ruled the UV segment, sold 233,915 units in FY18, commanding a market share of 25.38%, smaller than the share of 29.20% in FY17. It lost share to Maruti Suzuki, which sold more UVs during the year at 253,759 units, commanding a market share of 27.53%, up from 25.7% in FY17. In FY18, while the UV segment grew by 21% year-on-year, M&M’s sales grew only 5%. In contrast, Maruti Suzuki clocked 30% growth in UVs. However, in Q4FY18, M&M pulled back with a 27% market share, ahead of Maruti at 25%.