Monsoon driving up M&M volumes

Auto major sees double-digit growth in tractor, UV sales in Q1

M&M’s share of the tractor market has risen to its highest in several years and its sales of utility vehicles are growing rapidly on a good monsoon.

“The best news for our business this year is the monsoon. Given the way things are, we believe growth will continue at this pace,” Pawan Goenka, executive director at M&M, said during a media interaction.

Goenka said M&M closed the April-June quarter with a 43.8 per cent share of the tractor market, the highest in almost a decade. At 21 per cent, M&M’s tractor sales growth was higher than the 15 per cent registered by the industry during the quarter.

“A good monsoon first affects tractors, followed by two-wheelers and passenger vehicles. The change in sentiment impacts business,” said Goenka.

The improved sentiment is driving the company’s stock price, which hit a 52 week high of Rs 1,479 on Tuesday. The stock of country’s third most valued automobile company — after Tata Motors and Maruti Suzuki — has appreciated 20 per cent in three months.

M&M’s tractor sales had declined for two consecutive years as the country received deficit monsoon rain. Tractor sales declined 9 per cent to 213,591 in 2015-16. Goenka said while sales in the first quarter were good, they usually improved in the second and third quarters.

Good rainfall and a consequent improvement in rural purchasing power also augur well for the company’s utility vehicle sales, which grew 13 per cent in April-June. Half of M&M’s utility vehicles are sold in rural and semi-urban areas.

M&M will decide on the way forward for its fledgling two-wheeler business. The company had less than 1 per cent market share in 2015-16, selling 144,355 two-wheelers in a 16 million market. The company was recently forced to lay off hundreds of employees in the two-wheeler division.

“This is one vertical that did not meet expectations last year. We are in the process of deciding the way forward,” Goenka said and added a formal announcement would be made in a couple of months.

Asked whether M&M would exit the two-wheeler business, which it had entered in 2008 after acquiring the assets of Kinetic Motors, Goenka said: “It is unlikely.”