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Commencing the electric UV journey with XUV400

* We attended M&M’s EV day, where the company re-iterated its future EV strategies. The recently showcased electric XUV400 model has been developed at an investment of Rs5- 6bn. The model features a superior range and acceleration in comparison to peers in the non-luxury segment. Bookings and dispatches are expected to commence in Q4FY23.

* Post XUV400 launch, four more electric models under XUV and BE brands, based on a dedicated platform (INGLO), are scheduled for launch over December 2024 to October 2026. Investments relating to the platform and model development are expected at an aggregate of Rs100bn over FY22-27. M&M will collaborate with Volkswagen for components such as electric drivetrain, battery system, and battery cells.

* We remain positive on M&M due to its sales upcycle across segments and a large order book in PVs (270,000+ units). We have raised our FY23-25E EPS estimates by 3-7%, factoring an increase in volume assumptions.

* We have built in FY22-25E revenue/earnings CAGRs at 23%/21%. We re-affirm Buy with a revised SOTP value of Rs1,490 (Rs1,390 earlier), based on 12x standalone Sep’24E EPS (DCF-based) and the value of subsidiaries/investments at Rs658/share.

Key Takeaways from the Analyst Meet

* M&M has unveiled electric XUV400, with best-in-class acceleration at 8.3 seconds for 0- 100km and range of 456km. The model is equipped with connectivity features and multiple drive modes. XUV400, for the most part, looks similar to its ICE-powered sibling (XUV300), but it gets some EV-specific touches. At 4.2meter length, it is longer than XUV300, as EVs do not get any tax benefits for being under four meters. The model has been developed at an investment of Rs5-6bn, which includes cost of platform modification and electrification.

* The announcement of model pricing and order bookings are expected in January 2023. The model is to be launched in a staggered manner, with 16 cities in Phase 1. The model is likely to compete with both B and C segment SUVs (refer Exhibit 1)

* New dedicated EV platform – INGLO: The new platform would include the use of blade and prismatic batteries with capacity of 60-80kWH, fast charging up to 175kWH allowing 80% charge in <30 minutes, and output of 170-250kWH to support acceleration of 0- 100kmph under six seconds and would allow variable lengths between 4.3-4.8 meters. Vehicles developed off this platform can be obtained with optional all-wheel drive (AWD), multiple drive modes, advanced driver-assistance system (ADAS), and the capability to handle L2+ autonomous driving.

Key takeaways from the Analyst Meet (continued)

* M&M will sell EVs under two brands – XUV and BE. The first car, XUV.e8 will be launched in India in December 2024, while XUV.e9 will arrive in April 2025. BE.05 will have its market debut in October 2025 and BE.06 will be launched in October 2026 (refer Exhibit 2). Design inputs for these vehicles are being received from India, UK, and Italy centers.

* Led by multiple products, aspirational EV volume target by FY27 stands at 200,000 units, which implies 30% penetration.

* M&M will collaborate with Volkswagen for components for INGLO platform. Volkswagen is expected to supply components such as electric drivetrain, battery system, and battery cells for 1mn+ units over the lifetime of the platform.

* Total investment in the E-PV entity is expected to be Rs100bn, staggered over FY22/23 at Rs20bn, FY24 at Rs20bn, and the remaining Rs60bn over FY25-27. M&M plans to meet a part of the funding over FY24-27 directly or through debt/third-party investors. British International Investment Plc (BII) infusion would be at Rs19.25bn. The Rs100bn investment would cover cost of development of platform and four models.

* On upcoming powertrains, M&M’s management has indicated that it will not venture into hybrids and will focus only on EVs.

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