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M&M Shares Slump Over Ban on Big Diesel SUVs

M&M Shares Slump Over Ban on Big Diesel SUVs

The Supreme Court on Wednesday banned the registration of diesel cars and sports utility vehicles (SUVs) with engines beyond 2,000 cc in Delhi. The court also doubled the green tax on commercial vehicles entering the city to tackle one of the worst-ever bouts of toxic smog that has hit Delhi.

The temporary ban on sale of diesel-powered big SUVs and luxury cars in one of the country's biggest market will be applicable till March 31, 2016.

The court's decision hit shares in automakers such as Mahindra & Mahindra. India's biggest utility vehicle maker traded 4.5 per cent lower because a significant percentage of its sales come from SUVs that have engine size of over 2000 cc. The stock had earlier fallen as much as 6 per cent. Tata Motors, which also manufactures SUVs with over 2000 cc, traded flat.

"The worst affected could be Mahindra if (the ban) becomes a reality because its entire SUV portfolio is diesel based. Delhi is a big market for diesel cars with 7 per cent of total 2.6 million four wheelers and 8,000 luxury cars being sold in Delhi on an annual basis," said brokerage Maybank.

Analysts say Maruti Suzuki -- India's biggest carmaker - could be a beneficiary of the partial ban on diesel cars in Delhi as most of its fleet comprises of smaller sized engines and petrol cars.

"Post ban, most automakers will rethink their engine strategies... for the short term, Maruti will be the beneficiary though it will face a lot of competition in the long run," said Mahantesh Sabarad of SBI Cap Securities.

As of 11.30 a.m., M&M shares traded 4.5 per cent lower at Rs 1,231, while Maruti Suzuki shares were up 0.25 per cent at Rs 4,632. Tata Motors shares traded 0.4 per cent higher at Rs 381 as compared to 0.7 per cent gain in the broader markets.