M&M will have a complete portfolio of electric SUVs that will come out from 2024-25 onwards: Rajesh Jejurikar

Rajesh Jejurikar, Executive Director, Auto & Farm sectors), Mahindra & Mahindra, talks about Q1FY22 numbers, growth outlook in the future, Challenges including shortage of semiconductors, launch portfolio, electric vehicles, investment plans, and growth opportunities in the farm equipment sector among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: The company has posted more than 23% profit on a year-on-year basis and the margins are good. Going forward, what is the outlook for FY22? And you would have set certain plans at the beginning of the year. Do you feel that demand is so much that you will be able to cover up for those months that were impacted by the second wave of the pandemic?

A: First of all, I would like to talk about the first quarter, and I think, we did well because it was a difficult quarter and the effect of COVID 2.0 was quite strong in the rural areas. Last year, when the COVID started rural areas were not affected at all and the area was booming as soon as the lockdown was opened. But this time, there was a tangible effect in the rural areas and in that context, the growth of the tractor industry stood at 39% with so much stress in the rural area. So that has been very strong growth. We have increased our market share in tractors and have attained a market share of around 41.8% in this quarter. In the case of automotive, there were lockdowns and dealers were shut but the demand and bookings have been quite strong. In fact, there has been very strong booking and waiting lists on all of our brands, so, we are very positive and optimistic about the future. 

Q: But there is a problem of shortage of supply chain especially in case of semiconductors, which is a challenge for the entire industry. How will you address it and will be its impact in the future quarters?

A: First of all, as far as the supply chain is concerned, the tractor supply chain was disrupted a lot last year due to which our market share was affected. This year, we have solved all the issues related to the supply chain of tractors and the tractor is well set. This is why we are seeing a growth in the market share of tractors. As we look going into the future as well, we have built reasonable stock in the tractors, so, we think that we are well prepared to go into the season to leverage whatsoever demand growth will come in the way. On the ground, the fundamentals in the rural areas are good and hopefully, the demand will stay strong. While the auto side has just one issue and that is related to semiconductors. Apart from that, all the supply chain issues have been stabilized and we have a strategy of building the stocks of the rest of the materials and as the semi-conductors are reaching to us, we will be able to convert them into vehicles. So, we are de-risking ourselves by building stocks of other raw materials and then complete the product or finish the final product when we get the semi-conductor. So that is the overall approach. The semi-conductor issue is a global issue due to which every manufacturer has to grapple with the situation. In this situation, the biggest issue is uncertainty because it is dynamic, and we are dependent on what is happening in different parts of the world. So, we have to just be prepared to handle it. Our recent launches are coming, and we have launched NEO and the response has been very good, we didn’t wait because of the semi-conductor issue. We will also launch XUV 700 this quarter and again we are not holding the launch due to the semiconductor issue. We think the issue is here to stay and life has to go on and we have to prepare for it. 

Q: The response for Thar, which was launched last year on August 15, 2020, has been phenomenal and it is still at a long waiting period and XUV 700 is about to come. From the point of view of launches, how will we see the automotive sector particularly in terms of SUV strategy because you are known as an SUV Maker although and the SUV segment across segment is growing the most? How do you see yourself in that space because a lot of new players have entered the market with a lot of offerings and competition has intensified?

A: As you said SUV is core to our business. We are known as SUV makers, and we have defined a purpose statement that what we are saying is what we are going to be behind is creating authentic SUVs. And, authentic SUVs are those which will be adventure-ready and adventure-ready doesn’t mean that we will just make vehicles like Thar, which are going to be 4x4 and of four. It really is this type of exploring the impossible. So, for people who want to go out, explore new things, they should think about Mahindra and that is what we are and that is what we are known for. So, all of our products will be that and when you look at that you must feel that it is Mahindra and when you drive you should feel very comfortable and sophisticated feel is very important and technology. As you are seeing that in SUV 700, we have started revealing the features, stunning breakthrough technology is the first in seven. All of our products are going to be exciting and recently launched Neo and for that segment, it is a very good offer. Thar as you have said there are very strong bookings, and we are making more than 3,000 vehicles per month and yet the waiting period is 10 months. Then, we have XUV 700 and next year we will get the Jeep 101, which is a very exciting project. We have a lot in the pipeline and over the next three years, we will bring 9 new SUVs combining born electric. So, we have an exciting portfolio coming up. 

Q: Now, people are slowly adopting electric vehicles. How much focus do you have in the segment and what are the investments in it? You have also commissioned a Mahindra Electric, so, what are the plans and the broader picture and how things will evolve? Will you participate in the infrastructure building of the electric vehicles also?

A: We have divided the electric vehicle business into two parts and the one is what we are calling last-mile mobility. The last mile mobility is electric vehicles like three-wheelers, small four-wheelers, which do not need to run for long-distance. We believe the demand for the segment is ready at a certain point because the economic value for the segment operator is very good as their running per day is quite more. So, the vehicles in which running per day is more will get a value of using electric because there is a definite benefit compared to the fuel cost and the maintenance cost as well. So, we are seeing that segment picking up first and we have created now a separate focus. You must be aware that we are going to merge Mahindra Electric into M&M and then we will have what we are calling the last mile mobility vertical. The second part is how do we really create a strong future ready electric SUV.  Those are our key areas of focus. There will be born-electric vehicles for which we have established our product development centre at Detroit with a very accomplished leader of German origin. And we are going to design our new design centre in the UK with Pratap Bose as a leader of it. With the product development Support from MRV, Chennai. So, it is a three-prompt thing to build strong and it will be global class and very stunning. We are also working on converting some of our current SUV, which is the IC drive to electric, which is the second part of it. So, there will be a full portfolio of electric SUVs that will come out starting 2024-25 onwards. We believe the personal segment of electric vehicles will take two to three years to evolve and by then we will be ready with a very strong portfolio. We have a thought that we have to think futuristic as this is a technology, which is evolving, if you think about the tomorrow’s vehicle then we don’t have the latest technology, we need to think three years, five years and seven years ahead and come out with a technology which will be relevant then and that is the approach. 

Q: A lot of investments will be required in this space. In the next three-four years, what are the numbers that you will have?

A: Totally for our auto business, we have said that in the next three years, it will be around Rs 9,000 crore of investment of which Rs 3,000 crore will be on electric and Rs 6,000 on other auto products. This includes the investment in XUV 700, which is carrying over into this year and Jeep 101 which will be there next year. So, this number includes the investment in products, which are still not launched. 

Q: In the context of the Farm Equipment Sector (FES), you have made several acquisitions in the last some time. What is an update on it and where do you see the farm equipment space going for Mahindra & Mahindra?

A: When we think about the FES strategy, we break it up into four parts and they are 

(i) Our core domestic, which is a tractor and the farm machines.

(ii) Farm machinery global 

(iii) Our overall global business 

(iv) The role of technology 
So, in the tractor business, we are strong, and we hope to increase our market share. Both of our brands, Mahindra and Swaraj, are doing extremely well and we see a huge opportunity for farm machines in the domestic market. In India, the farm machines right now are 10-15% of the agri-machine total. That is completely different from the global average. Around the world, farm machines are much-much bigger than tractors. If you want to make a comparison the kind of tractor penetration was there in India in the 1960s that is the kind of farm machine penetration today. So, internally, we say India is tractorized not mechanized. There is a huge opportunity for mechanization, and we would like to leverage that. So, that is a key part of our growth strategy. Global business is we went, we got into new acquisition, we had to consolidate them and stabilize them, and we did that in the last three quarters. Three years back, we were quite a few companies globally in the farm equipment sector. The initial period that is required to stabilize and restructuring them has happened in the last two to three years and its benefits are visible now. We had now three quarters of firstly turning them around and making them profitable. We actually made a good profit in quarter one of this year in the FES side of the international subsidiaries. So, now, we think that it is a time when we have stabilized them, restructured them, brought the breakeven point and now it is a time to look at the growth path for that. In the space of technology, we are really very committed to this, and we have started something called Krish-e, which is farming as the service. Krishi is digital and on-ground so, we offer Krish-e as the service through our dealership but with a lot of tech support. So, things like precision farming are pilots that we are doing, we have created some technique plots, where we work with farmers on matching. So, we take some acres, wherein, we bring the latest technology and compare it with them and show them the difference and the impact on productivity. So, we believe that truly we want to impact farmers life that is all rises about. Even before COVID, we were saying that rural areas were really moving very quickly to adopting digital YouTube, WhatsApp, which was very common. With COVID, it is completely skyrocketed and through the lockdowns, our salespeople were doing Team Calls or Zoom Calls with the customers. So, it is digital that has completely changed where we are. 

Q: Now, do you think that you have embarked upon a path where you will go standalone, where you will have your own strategy in which you will be self-dependent in terms of technology and now, you are not looking out for any more partners in that sense?

A: No, not at all. We strongly believe that for every partnership we did, we have learnt out of that, and it has helped us, and we are very open to doing partnerships and alliances. We are actively looking for partnerships and alliances, especially in the electric space. If we will think that in electric space, we are going to do it ourselves, it is not going to happen. So, we will work very closely with partners and technology. In partnerships, we also have had many of our supplier partners, for example, we have such an evolved technology and software on XUV 700, we have done it with our suppliers, who have global scale software capability. So, partnerships are not always about joint ventures. I think the partnership is about how you leverage each other and where you identify the best scale and competency available and how you can use it to the mutual advantage of both. We are absolutely and completely open to partnerships and we are looking for them. 

Q: What is the target as a group you have decided in terms of the Group’s top line, bottom line, margins and market share? where do you see yourself and what is the number at which you are working?

A: Clearly, we want to grow, and we are looking at a double-digit CAGR growth, I am talking about the auto and farm not about the whole group because we don’t respond to the whole group because we are multiple companies. So, definitely a double-digit CAGR of growth, a ROC of 18%+ as a business and number one in core SUVs to maintain our strong leadership in FES. So, these are some key measures, where at the top is customer satisfaction. So, these are our key goals for the next three to four years.