Maruti Suzuki Soars on Policy Boost; M&M and Tata Motors Lag Amid Industry Shifts

Maruti Suzuki, Mahindra & Mahindra (M&M), and Tata Motors have recently come into the spotlight due to significant developments in the automotive industry. On Wednesday, Maruti Suzuki's share price surged over 3%, reaching a record high, while M&M's shares dropped nearly 8%, and Tata Motors' shares fell by more than 2%. These movements in stock prices reflect a complex interplay of policy changes, market dynamics, and strategic imperatives in the auto sector.

Maruti Suzuki's Record High: Maruti Suzuki's share price experienced a notable rally, driven by favorable policy decisions in Uttar Pradesh and West Bengal. The Uttar Pradesh government announced a waiver of registration fees for hybrid vehicles for three years, aligning them with electric vehicles (EVs) and reducing on-road prices. Additionally, West Bengal reduced registration fees for CNG cars. Given that Uttar Pradesh contributes around 11% of Maruti Suzuki's overall domestic passenger vehicle (PV) sales as of FY24, these policy changes are expected to significantly boost the company's market position.

Maruti Suzuki currently offers two hybrid models, the Grand Vitara and Invicto. Analysts believe that these policy developments will enhance Maruti Suzuki's competitive positioning, particularly in the SUV segment, where it currently holds a 20% market share compared to 65% in non-SUVs. 

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Challenges for M&M and Tata Motors: In contrast, M&M and Tata Motors are facing challenges due to evolving market trends. M&M's shares fell nearly 8%, while Tata Motors' shares declined by more than 2%. One of the key factors behind this downturn is the slowing demand for EVs, which led Tata Motors to revise its estimate of the FY30 car industry EV mix to 20%. 

People highlighted that M&M's addressable market size would shrink if it does not adopt hybrids. Based on Tata Motors' guidance, the industry mix in FY30 is projected to be 20% EV, 5% diesel, 25% CNG, and 50% petrol (including hybrids). Without hybrids, M&M would only address 30-35% of the FY30 car market, requiring it to attain a 50% share of this market to maintain its current market share of 11-12% considering it as a challenging target. 

Strategic Moves and Industry Trends: To counter the market challenges, M&M announced a temporary price cut of up to ₹2 lakh for its top XUV700 variant, the XUV700 AX7. Similarly, Tata Motors implemented price cuts on its SUVs, the Harrier and Safari, effective until July 31. These price cuts aim to address the softness in underlying demand for passenger vehicles (PVs).

Despite the positive developments for Maruti Suzuki, the overall environment for PVs remains challenging. The industry faces slowing retail sales, declining order books, rising inventory levels of up to 60 days, and increasing discounts. 

It is predicted that M&M will outperform the broader PV industry with double-digit volume growth, supported by new launches such as the XUV3X0 and the Thar 5-Door. However, trends for existing models will require close monitoring. Tata Motors is also expected to outperform the industry with upcoming launches like the Curvv, although its leadership will be tested by rising competitive intensity.

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In conclusion, the automotive industry is witnessing significant shifts driven by policy changes, market dynamics, and strategic imperatives. Maruti Suzuki stands to benefit from recent policy boosts, enhancing its competitive positioning in the hybrid vehicle market. However, M&M and Tata Motors face challenges due to slowing EV demand and the need for hybrid adoption. Analysts emphasize the importance of hybrid strategies for OEMs to remain competitive in the evolving market landscape. As the industry navigates these changes, companies will need to adapt their strategies to capture new opportunities and address emerging challenges.

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