Mahindra & Mahindra Receives Bullish Outlook From HSBC On EV Margin Improvement Potential

HSBC Global Research has a positive outlook on Mahindra & Mahindra Ltd., given potential for improvement in the company's electric vehicle margins over the next 12-18 months. It has retained its 'buy' rating for M&M with a target price of Rs 3,470.

"We believe M&M's EV margins can potentially improve to mid-single digits over the next 12-18 months," HSBC stated in its report. The brokerage firm noted that including the Production Linked Incentive benefit, profitability could be even higher and may catch up with internal combustion engine margins.

M&M's stock price outlook is now highly dependent on its EV success, both in terms of volumes and margins. "M&M reported nearly Ebitda break-even for its EV business in 4QFY25, with a volume of around 3K in the quarter," HSBC highlighted. If M&M can sustain 4-5K EV volume per month, profitability is likely to surprise positively and reach mid-single digits in 12-18 months, which is equivalent to the ICE business in absolute terms, the brokerage said. "Including PLI, it could even come close to ICE double-digit margins."

HSBC compared the tax structure and cost differential of M&M's key EV model XEV 9e versus its key ICE model XUV-700. "Thanks to lower taxation, the government offers indirect support of Rs 900K per EV," the report explained. The incremental cost of an EV is unlikely to be higher than these savings for the company, it said.

Looking ahead, the brokerage anticipates that the government will eventually normalise taxes on EVs. "Autos is the largest contributor to manufacturing GDP in India, and the exchequer earns around $35 billion of GST every year from the industry," HSBC noted. As GST normalises on EVs, prices will rise from current levels. However, HSBC expects costs to come down further and ICE costs to increase due to impending emission norms.

HSBC retained the 'buy' rating, citing upside catalysts from tractor, SUV, and BEV incremental sales, plus potential margin expansion from improving EV profitability. "Consensus is factoring in 7% growth in tractors in FY26 and average SUV sales volume of around 50,000 per month. Both these expectations seem to have upside risk."

Emission norms and product issues remain key downside risks, but HSBC remains optimistic about M&M's performance over the next year.