M&M - The Quanto vs Sedans= Space vs Mileage - MF Global

M&M launched India's first sub 4m SUV, the Quanto yesterday. We visited a showroom to have a look at the vehicle (although we were not able to test drive it). While the vehicle offers more space than a entry level sedan, its comparatively lower fuel efficiency might prevent it from becoming a mass seller.

Aggressively priced. M&M has priced the vehicle starting from Rs 5,82,000 (ex showroom Thane) which places it in competition with the premium compact segment (Polo, Swift) and entry level sedan space (Dzire). The vehicle's length (sub 4m) and engine capacity (slightly less tha 1.5l) have been configured to benefit from lower excise duties (12% versus 27%).

Has more capacity and power than a compact hatchback/Sedan... The Quanto is seven seater with 5 main seats and two adjustable jump seats in the back. While the back seats may not provide comfortable seating for two adults, they provide enough leg room for children - this is likely to appeal to large families. In addition, the vehicle with its higher capacity engines (1.5l versus 1.25l for the Swift/Dzire) provides extra power which along with a higher seating position provides a driving experience similar to an SUV.

...But trails in fuel efficiency. M&M claims an ARAI fuel efficiency of 17.2 kmpl. While the mileage is clearly better than that of SUV's, it would fall ~25% short of the mileage offered by the cars (Swift and offer ~23kmpl). This may negatively impact the purchase decision of a potential sedan owner.

Overall, a well conceived product. The vehicle seems to be well conceived with a clear attempt to draw buyers from the sedan category. In our veiw, from a consumers perspective, it may turn out to be a decision between fuel efficiency on one side and larger space/seating capacity on the other. Currently, M&M has a production capacity of ~7000 units per month for the Quanto and the Xylo combined (Xylo sells ~2500 units per month). We believe this should more than suffice; we factor in volumes similar to the Xylo.

Source : Equity Bulls

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