Regional liquor players better placed amid price hikes: Dipan Mehta
"One big concern with Maruti is this particular absence of a coherent, I would say, or very aggressive EV strategy and second part with Maruti is the fact that the freshness of the models is gone," says
Dipan Mehta
, Director, Elixir Equities.
Help us with your take on this news flow because yes, it is not just
Maruti Suzuki
which is now being vocal or some reports are suggesting that the production could take a hit, but some of the other major OEMs have been showing concern regarding this. But along with that we also have that global news flow where between US and China the trade deal respected to the rare earth is through. Do you believe for the auto majors it could be a serious issue in the near term, but someone should look at the bigger picture? Give us your sense on this whole news flow.
Dipan Mehta:
See, it is certainly going to have a temporary effect but that is more restricted to the EVs and not so much to the ICE vehicles. It was a
semiconductor supply chain
which was getting more and more difficult for the entire auto Oem global.
So, it is going to have some temporary effect but the bigger picture here for Maruti per se and for a record we have a sizable investment from our perspective at least in our portfolios on
Maruti Suzuki
and we are getting increasingly cautious and concern because for one the company is well behind the curve when it comes to new electric vehicles. Mahindra & Mahindra clearly has the lead as do a lot of the other Chinese companies operating in India and they are gaining
market share
in a significant way.
Right now, it may appear to be small, but Maruti lost three percentage point market share in the last 12 months or so and that could turn out to be even more sharper as more and more EVs come into play. So, one big concern with Maruti is this particular absence of a coherent, I would say, or very aggressive EV strategy and second part with Maruti is the fact that the freshness of the models is gone.
See, Maruti did very well for last two-three years because of many new models coming in, but now the lineup is not as exciting as it was looking at two-three years ago or so and there is far more competition. So, I am getting a bit cautious on Maruti. I have not thrown in the towel as yet, but within the auto space there are two companies which come to mind, usual disclosure we and our clients are invested, one is, of course, M&M which should do very well, even the tractor division should do very well because of better monsoon and last month numbers also were good and second, of course, is
Eicher Motors
. Both these companies if you track, the volume figures monthly, you will be quite impressed on the progress which they are making.
Live Events
Help us with your take on this whole news flow. It has been a steep hike in terms of the prices. The volumes are expected to take a hit. But like Karan was highlighting, two segments particularly can have an impact be it the low prestige segment and the luxury segment. Which segment do you believe can have the most hit with respect to this news flow and what implications can it have on the volumes?
Dipan Mehta:
I think Karan summarised it pretty well and basically, all I can add over here is that in our assessment of the alcobev industry, it is better to be with the regional players, the likes of
Radico Khaitan
or Allied Blenders. Of course,
Allied Blenders
is not a regional player. It is India's largest alcohol company in terms of volume. But there are other smaller players as well, Piccadily comes to mind, Som Distilleries.
We have to work in this industry through these regional players. They are able to manage the regulatory environment quite well. But there is, of course, the risk that a particular state in which they have a high sales concentration, may increase the levy of taxes. But on the whole, see, eventually these things do get absorbed and there could be a dip in volumes for the next 6 to 12 months or so and effect could come on the company's corporate profitability as well.
But these are great long-term secular growth stories. And if you buy them when the chips are down, when the cycle is down, then when the demand revives, these companies tend to have a super increase in their profitability as we have seen in the past. So, it is a sector we like to be overweight in. But I think let us just see the impact of this play out for the next couple of quarters or so.
ETMarkets WhatsApp channel
)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
an hour ago
- Mint
Hybrid carmakers seek tax incentives as auto industry lobbies for clean mobility benefits
New Delhi: Hybrid carmakers have approached the ministry of heavy industries seeking tax incentives, according to two people aware of the development, even as the automotive industry has raised concerns over tax parity for hybrids and pure electric vehicles. "Hybrid makers are seeking tax-related benefits because the tax for clean mobility is lower. Electric vehicles have a goods and services tax of 5%, but hybrids are taxed at par with fossil-fuel vehicles," one person said. Hybrid carmakers had approached the heavy industries ministry over the definition of clean mobility and highlighted the tax differential between fossil-fuel and hybrid vehicles, the second person said. The government will incentivise all forms of clean mobility, Mint reported on 6 June, citing heavy industries minister HD Kumaraswamy. A draft of the Delhi EV Policy 2.0 proposing parity of incentives between zero-emission electric vehicles and hybrid vehicles propped up a debate in April, leading to consultations between the heavy industries ministry and automakers. Also Read | Hybrids vs EVs: New advisory for Delhi fleet operators adds fresh fuel to fire The issue of tax incentives for hybrids has been a longstanding concern, the second person said. The matter involves aspects such as whether India can reduce the reliance on Chinese supply chains for EVs and whether state governments are willing to give up tax revenue to support hybrids. There is growing clamour to de-risk electric vehicle portfolios from Chinese supply chains, as highlighted by an industry veteran in a letter to Kumaraswamy. A clean mobility strategy that incentivises only electric vehicles is susceptible to trade-related risks, Rajan Wadhera, former president of the Society of Indian Automobile Manufacturers, said in the letter. "If we pursue only one technology for our carbon-reduction goals, we would be exposing ourselves to serious risk by becoming totally dependent on China," Wadhera said in the letter dated 4 June. However, he added that India can harness alternative technologies such as biofuels, strong hybrids, compressed natural gas, liquified natural gas and hydrogen. SHEV, PHEV Most recently, the disruption in rare earth magnet supply chains, which is controlled by China, has exposed the risks of being import-dependent for key industrial components. Magnet supply constraints could impact electric vehicle production. Maruti Suzuki, India's largest car manufacturer, Toyota and Honda Cars India are among the top makers of hybrids in the country. Maruti Suzuki and Toyota have a strategic partnership under which they share hybrid technology for their vehicles. Queries sent to Toyota Kirloskar Motor, Honda Cars India, and the heavy industries ministry remained unanswered till publishing time. Also Read | India 'increasingly important' as Suzuki's global exports hub for EVs, hybrids, small cars: Toshihiro Suzuki Hybrid vehicles, which use petrol/diesel engines with an electric motor and battery to improve fuel efficiency and reduce emissions, are of two types – strong hybrid electric vehicles (SHEVs) and plug-in hybrid electric vehicles (PHEVs). While SHEVs run mostly on fossil fuels, a battery-powered motor also aids the powertrain. On the other hand, PHEVs have a charging port for a battery that generates electricity for the car, along with an internal combustion engine that runs on fossil fuels. According to Rahul Bharti, senior executive officer for corporate affairs at Maruti Suzuki, the company is pursuing multiple technologies for decarbonisation and is trying to make SHEVs viable in India. However, the GST on SHEVs is almost similar to the rate for fossil fuel cars and their ex-factory cost is higher owing to the battery and motor. 'If we get some policy support and the volume of hybrids increases, we could go beyond Li-ion cell localisation to electrode level localisation and secure our supply chain in India," Bharti said. Compensation cess Experts said the debate over taxation of hybrid vehicles may boil down to the compensation cess component, which is levied on fossil fuel and hybrid vehicles but not on EVs. Electric vehicles attract a GST of 5%, while hybrids and fossil-fuel vehicles are levied a 28% tax. Also Read | How hybrids are reshaping India's green auto market "At present, consumers are subject to a 43% tax on vehicles powered by fossil fuels or hybrids. This consists of a 28% GST and a 15% compensation cess, the latter of which supports state revenues. For certain larger luxury cars, this may be even higher – up to 48%. In contrast, electric vehicles benefit from significantly lower taxation, with only a 5% GST," said Khushboo Jain, principal associate at Roedl & Partner India, a tax consultancy. "States may have to consider if they want to lower their compensation cess, in case the issue is discussed within the GST Council," Jain addeda
Time of India
an hour ago
- Time of India
‘Beijing keeps its word': China responds as Trump declares US-China trade deal ‘done' - The Economic Times Video
China responded firmly to US President Donald Trump's announcement of a renewed trade deal, confirming that both nations must stick to their commitments. Following a phone call between Trump and Chinese President Xi Jinping, tensions cooled as both sides revisited the Geneva framework in new talks held in London. Beijing emphasises it has always honoured its word, marking a delicate pause in the ongoing US-China trade war.
India Gazette
an hour ago
- India Gazette
Supply uncertainty of rare earth magnets from China could weigh auto industry: ICRA
New Delhi [India], June 12 (ANI): Rare-earth magnet inventories are likely to 'taper off' by mid-July 2025 for the automobile industry, weighed down by the export restrictions from China and ensuing shipment delays, according to a release by rating agency ICRA. 'With China tightening export controls and delaying shipment clearances, rare earth magnet inventories are projected to last only until mid-July 2025 for several, if not all, passenger vehicle and two-wheeler applications,' Jitin Makkar, Senior Vice President and Group Head - Corporate Ratings, ICRA Industry is looking for contingency options and alternative supply chains, but it is riddled with difficulties. 'While the automobile industry is exploring a range of contingency options, each of these appears ridden with logistical, regulatory, and engineering complexities, exacerbating the prevailing uncertainty,' the rating agency said.'India imported around USD 200 million worth of these magnets for both automotive and non-automotive applications, with approximately 85% of this sourced from China. While the trade value may appear modest, the strategic dependence it reflects is anything but the supply uncertainty has cast a shadow on production planning. The dependence on China for these specialised materials could upend the automobile sector, particularly the fast-growing electric vehicle segment, if the concern remains unresolved.' Makkar added. In order to deal with this risk, India is exploring various options such as importing fully assembled motors from China, or shipping the rotors, on which the rare earth magnets are mounted, to China for magnet assembly and then re-importing the assembled substituting rare earth magnets with alternatively engineered materials or introducing rare earth magnet-free motors could also be seen as alternative a Maruti Suzuki spokesperson on Thursday said, 'Regarding the situation on rare earth, as of now, there is no disruption in our operation due to this issue. There is a lot of uncertainty and the situation is continuously evolving.' Maruti Suzuki added, 'We are monitoring the situation and pursuing multiple solutions to ensure continuity in our operations. If and when there is any material impact to our business, we will inform all stakeholders in line with regulatory requirements.' (ANI)
