Tractor recovery, new launches to maintain volume momentum for M&M

Growth takes root: Automaker cultivates volume momentum as farm and auto segments harvest gains

Mahindra & Mahindra (M&M) delivered a stronger-than-expected operational performance in the October-December quarter (Q3) of 2024-25 (FY25), driven by solid growth in its automotive (auto) and farm equipment segments. Higher volumes improved operating leverage, expanding margins.

 

In the auto segment, the company reported a 16 per cent year-on-year (Y-o-Y) increase in volumes to 245,499 units. The sport utility vehicle (SUV) segment, its mainstay, led the growth with a 20 per cent rise to 142,000 units. Light commercial vehicles contributed the rest, growing 7 per cent over the previous year. To address demand, especially for the petrol variant, and capacity constraints, M&M plans to raise production of the XUV 3XO by 2,000 units per month, taking total capacity for the model to 9,000 units. Similarly, it aims to expand Thar Roxx’s capacity by 2,000 units in the coming months, from the current 9,000 units a month. Demand for the three-door Thar remains strong despite the withdrawal of launch discounts for the Thar Roxx.

 

In the near term, along with sport utility vehicle (SUV) sales, the market will closely watch how its two upcoming electric vehicles — BE 6 and XEV 9e — perform. With bookings opening this week and strong interest across variants, thanks to their 500-kilometre range and battery warranty, the company expects monthly sales of 5,000 units. Priced at ₹25-30 lakh, these models have helped M&M tap into a new customer base for its electric vehicles.

 

The tractor business also rebounded, with volumes rising 19.8 per cent Y-o-Y and 30 per cent sequentially to 121,744 units. A revival in key markets in the western and southern regions, after a prolonged slump, drove the recovery. The refreshed Swaraj brand played a crucial role, along with the company’s entry into the 20-30 horsepower segment, filling a gap in its portfolio. These moves helped M&M expand its tractor market share by 240 basis points (bps) to 44.2 per cent, its highest ever for any Q3. The year-to-date improvement was also strong, up 170 bps to 43.9 per cent.

 

Farm equipment volumes are expected to remain strong in the January-March quarter (Q4). M&M anticipates 15 per cent growth in the sector in Q4 and around 7 per cent for FY25 overall. Factors supporting this growth include healthy reservoir levels (16 per cent above the long-term average), record kharif foodgrain production, robust rabi sowing, and higher minimum support prices. The domestic tractor market’s recovery follows an 8.4 per cent decline in 2023-24 (FY24) and flat performance in the first half of FY25. 

 

Higher auto and farm equipment volumes boosted profitability. Auto segment margins expanded 120 bps to 9.7 per cent, while tractor margins rose 260 bps to 18.1 per cent. Since farm margins are nearly double those of the auto segment, the farm business’ stronger gains had a greater impact on overall profitability. Standalone margins (auto and farm combined) improved 160 bps to 14.6 per cent, aided by a better product mix, with tractors contributing more.

 

Brokerages have mixed views on the stock. Emkay Global Research raised its FY25 earnings per share estimate by 2 per cent to account for stronger tractor sales but kept its projections for 2025-26 and 2026-27 unchanged. Analysts led by Chirag Jain maintained a ‘reduce’ rating, citing that M&M’s internal combustion engine SUV cycle has largely run its course amid heightened competition in electric SUVs.

 

In contrast, Motilal Oswal Research reiterated its ‘buy’ rating, saying that M&M is well positioned to outperform in its core businesses, supported by a rural recovery and new launches in both utility vehicles and tractors. Analysts Aniket Mhatre and Amber Shukla highlighted that the company exceeded its FY24 earnings growth and return on equity (RoE) targets of 18 per cent and remains committed to delivering 15-20 per cent earnings growth and an 18 per cent RoE, ensuring steady profitability and shareholder returns.