MM to pass on entire excise hike to customers

Written By Unknown on Senin, 05 Januari 2015 | 21.03

Prospective car buyers will have to brace themselves to shell out a lot more for their new cars soon. Sports utility vehicle major Mahindra & Mahindra, for one, intends to pass on the entire increase in excise duty to the customer. Other car-makers may soon follow suit reports CNBC-TV18's Alexander Mathew and Areeb Sherwani.

Prospective car buyers will have to brace themselves to shell out a lot more for their new cars soon. Sports utility vehicle major Mahindra & Mahindra , for one, intends to pass on the entire increase in excise duty to the customer. Other car-makers may soon follow suit reports CNBC-TV18's Alexander Mathew and Areeb Sherwani.

That's the sound of frustration and it's a feeling carmakers in India have been dealing with for over a year now. Demand is just not picking up. Labour troubles are suddenly par for the course and now, the government has withdrawn the one benefit that had brought some relief. Carmakers like M&M say they have no choice but to pass this latest whammy on to the consumer. So forget the 1-2 percent price hikes that the industry normally rolls out. This time, prices may go up by 3-6 percent in one go.

Pravin Shah CEO - Automotive Division, M&M, said, "We are in the process of taking a call, and it should happen in the next couple of days."

Of course, this sharp hike in prices may push prospective car buyers to rethink their planned purchases. However that's something carmakers are bracing for as well. M&M says that for the foreseeable future, it will continue with its "no-production" days of 5-7 per month to manage inventories which means capacity utilization could take a hit.

"Talking about the capacity, we feel the capacity is underutilized and that's actually the reason for the no production days. If you ask me roughly what is your capacity utilization? It would range from 65-70 percent," said Shah.

Also Read: Auto cos, white goods makers in wait & watch mode on prices

New launches, however, will continue to be the key strategy to drive growth in 2015 as well. M&M says it will launch two new platforms in the passenger segment and one in the commercial vehicle segment over the next 12 months. These new launches will be supported by new drivelines and engines, including a petrol-powered offering - something its SUV portfolio does not have.

M&M stock price

On January 05, 2015, Mahindra and Mahindra closed at Rs 1219.40, down Rs 5.4, or 0.44 percent. The 52-week high of the share was Rs 1421.00 and the 52-week low was Rs 847.00.


The company's trailing 12-month (TTM) EPS was at Rs 58.92 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 20.7. The latest book value of the company is Rs 270.60 per share. At current value, the price-to-book value of the company is 4.51.


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