Hey folks, 

Here’s a quick recap of what we wrote over the week.

On Monday, we told you about the Indus Waters Treaty and how keeping it in abeyance affects the economies of both India and Pakistan. Tuesday’s story told you why OpenAI, PerplexityAI and Yahoo are lining up to buy Google Chrome and who’s most likely to end up owning it. Wednesday’s story explained why Reliance is going all in on quick commerce and why this business is more complex than just building scale. Thursday’s piece broke down why people are investing in whisky casks and why these alternative investments are susceptible to fraud. And on Friday we wrote about why Mastercard is betting on stablecoins and how it might change how money moves.

And with that out of the way, let’s now dive into today’s markets story. 

Mahindra boards the trucks and buses boom

In today’s Finshots, we break down why Mahindra & Mahindra is betting on electric trucks and buses.

The Story

So Mahindra & Mahindra (M&M) wants in on the buses and trucks segment.

Last week, the SUV leader announced that it will acquire nearly 59% stake in commercial vehicle (CV) maker SML Isuzu for ₹555 crores. Now, the deal values SML at ₹650 a share and it’s over 60% lower than its market price. And it’s one of the steepest discounts we’ve seen in a strategic acquisition.

Because this isn’t a distress sale either. In fact, Japan’s Sumitomo Corporation and Isuzu Motors have been looking to exit SML Isuzu for a while now. Offloading their stake has been part of a broader plan to move away from non-core businesses. And this felt like the right time to finally make that move. But for Mahindra? Well, it’s a chance to buy a CV brand with profitable operations, in-house R&D, a CNG and EV-ready product line and a manufacturing plant in Punjab… all for less than half its worth.

But wait. Why is Mahindra, the SUV and tractor behemoth, going after trucks and buses?

To understand this, let’s begin with what it already has.

In the <3.5-tonne Light Commercial Vehicle (LCV) market — think Bolero pickup variants and small delivery vans — Mahindra dominates with a 52% share. And it’s not just leading, it’s growing faster than the industry in volumes as well as market share.

But in the >3.5-tonne segment that’s all about trucks and buses? It’s barely scratching the surface with a 3% share. This segment though, has been booming for the company, surpassing the industry average by 15 times in FY24. So now, it’s aiming high ― a 10–12% market share by 2031, and over 20% by 2036. And thanks to the latest acquisition, it already has a head start. The deal instantly doubles M&M’s market share to 6%, putting it in a strong position to scale further.

Financially too, SML looks decent. It clocked ₹2,196 crores in revenue and ₹179 crores in EBITDA in FY24, and a stronghold in tier 2 and 3 cities. So Mahindra isn’t forming a new entity here. SML will remain listed and independently run — but operationally, the businesses will be unified for synergies. Common suppliers. Shared distribution. Better plant utilisation. And all that leads to lower costs and more scale.

And Mahindra has the muscle. It is funding these acquisitions from internal accruals. No debt or equity dilution.

Then we have to talk about buses.

You see, the deal gives Mahindra a share in the ILCV (Intermediate Light Commercial Vehicle) bus segment. It can now access SML’s 16% share in that space. And that’s enough to instantly become the fourth-largest original equipment manufacturer with a 21% market share in the bus segment.

And why does Mahindra believe buses and trucks could be a big opportunity?

Well, because buses and trucks make up less than 8% of India’s vehicles (excluding two and three-wheelers), but they account for 35% of road transport emissions. And if India wants to cut these emissions, this is where the axe must fall.

Which also brings us to e-buses. India’s bus fleet is massively under-electrified.

India currently has around 11,000 e-buses on the road — but that number is rising quickly. FY24 alone saw 3,600 new e-buses sold, up about 80% year-on-year. And as per CareEdge, that annual number could cross 17,000 units by FY27. And companies are winning. As of FY24, five players (Tata Motors, Olectra Greentech, PMI Electro, JBM Auto, Switch Mobility) control 88% of India’s e-bus market.

E-buses, in particular, are low-hanging fruit. They run on fixed routes. They have predictable charging needs. And most importantly, they’re owned or funded by governments who are willing to spend, subsidise and experiment. For context, the central government has announced over ₹28,000 crores in e-bus funding since 2015.

So for Mahindra, which is a leader in SUV, tractors and electric three wheelers, this looks like the right time to cash on this segmental opportunity as well.

Sure, it basically has no presence in this growing ecosystem right now. But with SML’s in-development Hiroi.ev, a 12m city bus platform, and experience in staff and fleet of buses, Mahindra suddenly has a product plus a platform to compete. It may not chase rental orders right away. But it can target private fleet operators, mobility contracts, and tier 2 or 3 transport networks. And all of these are currently seen as fast-growing segments.

And lastly, the strategy also fits into the company’s grand EV plan. It has committed investing ₹12,000 crores in the EV business MEAL (Mahindra Electric Automobile Limited) over the next three years and introduce variants under its different verticals.

So does the move make sense for Mahindra? On paper, yes. It’s aligned with Mahindra’s stated goal of growing its emerging businesses five fold, one of which is trucks and buses. And it also gains pricing power with suppliers and deeper distribution reach.

But here’s the thing. This is a long game. The upfront capex is high. Product testing and uptime benchmarks are unforgiving. And Mahindra will still have to fight entrenched players who already have experience executing state contracts.

Even globally, EV truck and bus bets have faced challenges. Take Proterra, a leading US-based electric bus maker that once supplied e-buses to over 130 transit agencies. Despite early traction and massive backing, the company filed for bankruptcy in 2023, citing high costs, supply chain disruptions and delayed orders. So yeah, building electric buses at scale is capital-intensive and could be heavily dependent on policy as well as long gestation cycles. Even in India, established players are struggling with volatile sales.

Which means Mahindra is entering a market that’s growing, yes — but also complicated and competitive.

And perhaps it knows that. The trucks and buses division, now projected at over ₹5,000 crores, gets scale, stability, and a new growth driver. And if it makes the right moves, it may just become a serious player in public mobility too.

Until next time...

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