M&M, Tata Motors shares skid up to 7%; here’s why

Shares of Mahindra and Mahindra (M&M) and Tata Motors tumbled up to 7% in intraday trade on Wednesday after auto heavyweights reduced prices of their vehicles. The price cut is seen as a move to lure customers to clear their unsold inventories amid a weak demand environment. The development came a day after the Uttar Pradesh government waived registration fees on strong hybrid cars, which will lead to reduction in on-road prices by up to ₹4 lakh.

M&M has cut prices of its sports utility vehicle (SUV) namely XUV700 by ₹2 lakh to celebrate the third anniversary of its flagship utility vehicles. 

Weighed down by the price cut, M&M shares declined as much as 7.3% to ₹2,697.80 on the BSE. Early today, the auto heavyweight opened marginally higher at ₹2,930.05 against the previous closing price of ₹2,925.80. The stock, however, soon slipped into negative terrain, in sync with the broader market.

At the time of reporting, Mahindra shares were trading at ₹2,729.40, down 6.7%, with a market capitalisation of ₹3.38 lakh crore. Meanwhile, the BSE benchmark Sensex was down by 580 points, or 0.72%, at 79,772 levels.   

At the current level, M&M shares trade 10.4% lower than its 52-week high of ₹3,013.95 on June 18, 2024, while it has risen 90% against its 52-week low of ₹1,418.55 hit on August 4, 2023.

In the last one year, M&M shares have given 74% returns to its investors, outperforming the BSE Auto index by 13%. The counter gained 68% in six months and 30% in 3 months, while it corrected nearly 5% in a month as investors booked profit at higher levels.

On Tuesday, Tata Motors also announced a reduction in the prices of its flagship SUVs, Harrier and Safari, with starting prices now at ₹14.99 lakh and ₹15.49 lakh, respectively. Besides, the auto major is also offering benefits of up to ₹1.4 lakh on popular SUV variants. These offers are valid till July 31, 2024.

Reacting to the news, shares of Tata Motors were also under pressure today, with the stock price falling up to 2.75% to hit an intraday low of ₹986.80 on the BSE.

Notably, auto companies are cutting their prices to clear their unsold inventories amid fragile demand. As per a report, around ₹60,000 crore worth of inventory is lying unsold with dealers, while the ongoing monsoon season is likely to further impact the demand. According to FADA, passenger vehicle sales experienced a notable decline in June, falling by 6.77% YoY (Year-over-Year) and 7.18% MoM (Month-over-Month). Inventory levels have reached an all-time high, ranging from 62 to 67 days.

In a release issued yesterday, M&M said that it lowered ex-showroom price for the AX7 range to celebrate the third anniversary of the XUV700 and achieving 2,00,000 production milestones in less than 3 years. The price of XUV700’s fully-loaded AX7 range will now start at ₹19.49 Lakh (ex-showroom, Delhi). The offer is valid for 4 months starting July 10, 2024.

“The refreshed pricing aims to make the XUV700 even more accessible to a broader range of customers while providing exceptional value,” it says in a release.

Last month, Mahindra, India’s leading SUV manufacturer, sold a total of 40,022 SUVs, a growth of 23% over last year. “June has been a momentous month, as we rolled out the 200,000th XUV700 from our facility. We also celebrated 25 years of Bolero Pik-Ups, a category creator and a market leader in the LCV segment,” says Veejay Nakra, President, Automotive Division, M&M, in the monthly sales release.  

For June, the total sales of M&M stood at 69,397 vehicles, a growth of 11%, including exports. In the commercial vehicles segment, Mahindra sold 20,594 vehicles in the domestic market.

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