Mumbai: Mahindra & Mahindra (M&M) has made major bets on electrification of its 3-wheeler and SUV businesses, but not much for electric trucks and buses yet. And that’s one of the key benefits it expects from the ₹550 crore deal to acquire a majority stake in SML Isuzu. Along with an opportunity to strengthen its presence in the Light Commercial Vehicle, Intermediate Commercial Vehicle (I&LCV) markets.
It led the electric commercial vehicle space during the last financial year, for the fourth consecutive year, and harbours an ambition to lead the electric SUV race too, but M&M is yet to play in the emerging electric truck and bus segment. And, that’s one of the key opportunities it sees in the ₹550 crore investment to acquire a 59 per cent stake in commercial vehicle maker SML Isuzu.
Though not a big part of the industry right now, Mahindra sees good prospects for electric buses in the near future. The EV play will be in line with its strategy to focus only on Light Commercial Vehicles (CVs up to 3.5 tons) and Intermediate Commercial Vehicles (CVs with 3.5 to 7.5 tons) with the majority stake acquisition in SML Isuzu.
Mahindra Truck and Bus unit is clear neither SML or Mahindra brand will get into the large, inter-city electric bus market. “We are bringing EVs to a segment like executive coach, school bus, staff bus segments, which have still not seen EVs properly,” says Vinod Sahay, President – Aerospace & Defence, Truck, Buses & CE, Mahindra Group.
The earlier announced plan by SML Isuzu to launch its first EV based on a dedicated platform – Hiroi.ev, during the current quarter will also lead to Mahindra’s entry into the tailpipe emission-free buses. Hiroi.ev buses are claimed to have a driving range of around 200 kilometres on a single charge. SML Isuzu had stated 2-3 hours as the charging time for the EV after its launch at the Bharat Global Mobility Expo in January this year.
“Many corporates and schools, especially the larger ones, are now looking at electric buses because for their green commitment,” says Sahay.
Along with EVs, the SML Isuzu stake buy will also give Mahindra an opportunity to enter the CNG commercial vehicle market.
In the traditional ICE industry, Mahindra and SML (brand name for SML Isuzu) sell 12,000 – 13,000 units of LCV, ICV buses a year, translating to a market share of around 20 per cent, according to Sahay.
The larger strategy
While the emerging technology space of EV presents opportunities to tap in the near future, what Mahindra sees as the immediate effect of the stake acquisition is the ‘critical mass’, which its truck and bus business unit needs for a sustainable business journey.
With the new investment, Mahindra gets close to the number two player Eicher in the LCV and ICV bus market with a 22 per cent market share. Eicher’s market share is estimated to be 28 per cent, while Tata leads the pack with a share of 38-40 per cent. In the LCV, ICV truck space, Mahindra gets into a double digit market share of 11-12 per cent. “Adding another 3-5 per cent in the next couple of years, we believe should be possible with the combined network, brand and ecosystem strength, which we get,” says Sahay. He adds that for buses, adding another 3-4 per cent market share is also achievable.
In the HCV space, dominated by Tata Motors and Ashok Leyland, Mahindra isn’t looking at a “very large” play, but targets to double its market share to 6% by FY31. Mahindra Truck and Bus says it will “keep hammering and we’ll break it, one point in time”. Its previous best was 5 per cent, achieved before the COVID pandemic.
Sahay, who also had stints in the commercial vehicle business in Mahindra, and prior to that in Tata Motors is hopeful that the CV market dominance by only a couple of players can be challenged. The senior executive notes that barring the M&HCV segment, the industry has already “broken” it. Tata Motors and Ashok Leyland have a combined estimated market share of over 80 per cent in the M&HCV space. The figure is said to stand at around 44 per cent in the LCV, ICV truck and bus market.
Also Read: Mahindra Truck and Bus Division: What lies ahead after SML Isuzu acquisition?
What Sahay also notes is that resale value isn’t as major an infiencer in determining a brand’s market acceptance, which could help challenger brands like Mahindra to gain customers if they offer competitive value. Longer ownership cycles of commercial vehicles due to significantly higher acquisition cost is said to be leading to lower value of pre-owned vehicles.
With the new inorganic move, Mahindra Truck and Bus also inherits a sales network of 125 outlets, which will enhance its overall sales network strength to around 225 points, “but it’s not that everyone will start selling each other’s products immediately”.
An equally valuable, if not more, inheritance would be the service station strength of 200 workshops, which is equivalent to what Mahindra Truck and Bus has currently. Synergy leveraging will happen there sooner. “Sales network has to be thought through. It cannot become automatic,” says Sahay.
