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Diesel SUVs Still Popular, But Costs Are Rising
While many carmakers are shifting to petrol, CNG, or electric vehicles, diesel still holds its ground in India, mainly because of strong demand for SUVs. These SUVs, around 18% of India's passenger vehicle market over the last three years, are popular for their power, highway driving, and long range. Mahindra & Mahindra (M&M) has become the clear leader in this diesel segment, capturing an estimated 56% of it in 2025 and nearly half of all diesel car sales. Popular models like the Scorpio, Thar, and Bolero continue to sell well.
BS7 Emission Rules Bring Big Cost Increases
This diesel dominance faces a major challenge from upcoming BS7 emission standards. Experts predict these new rules will add ₹30,000 to over ₹1 lakh in compliance costs per vehicle. This significant price jump could erase diesel's traditional cost advantage and make it less viable, especially for SUVs priced between ₹10-20 lakh. While diesel is still valued for its performance and torque, these benefits might not outweigh the higher costs under BS7.
M&M Plans for EVs and New Engine Types
While M&M profits from its diesel SUV lead, the company is also pursuing a diverse engine strategy to reduce future risks. M&M is developing its SUV lineup with various options, pushing forward its electric vehicle (EV) plans while continuing to innovate with internal combustion engines (ICE). The company is also looking into hybrid technology for both ICE and EV models, aiming for a balanced portfolio to meet different customer demands and regulations.
Competitors Also Adapt to Market Shifts
Other carmakers are also adapting. Tata Motors offers diesel in its Harrier and Safari SUVs due to ongoing demand, while also promoting its EVs and CNG cars. Hyundai India sees growing customer interest in diesel, with its share at 21% in FY26 for models like the Creta, and is expanding its EV range. Maruti Suzuki, however, has completely left the diesel market, showing varied approaches based on company strategy. The SUV market overall is strong, making up about 65% of passenger car sales. However, petrol and electric vehicles are expected to grow rapidly, with EVs projected to expand at a 21.65% annual rate.
Risks for M&M: Diesel Reliance and Transition Challenges
M&M's leadership in diesel SUVs carries risks. Relying on a market segment expected to shrink due to stricter emissions and changing buyer preferences could become a long-term problem. The large investments needed for BS7 compliance might hurt profits, especially if higher prices deter budget-conscious buyers. Additionally, the rapid growth of EVs and hybrids poses a direct threat, requiring constant innovation and significant funding for new technologies. M&M's financial results have been strong, with FY25 revenue of ₹1,59,211 crore and PAT of ₹12,929 crore, and a Q4 FY26 net profit of ₹4,667.57 crore. However, its P/E ratio of around 21-22 indicates investors are betting on future growth that depends on successfully shifting beyond its current engine strengths. The company plans 16 new launches by 2031 (10 ICE, 6 EV) to balance its offerings, but successfully executing this dual strategy in a competitive EV market will be crucial. The auto industry as a whole faces slower growth of 3-6% in FY2027 due to higher regulatory costs, which could affect sales and profit margins.
Outlook: M&M's Path Through New Engine Technologies
Analysts generally view Mahindra & Mahindra positively, with a consensus 'Buy' rating and target prices suggesting good future growth. The company is preparing for the future by planning 10 new ICE models and 6 new EVs by 2031, focusing on new vehicle designs and scalable platforms. This balanced strategy aims to use its strong SUV experience while adopting electric mobility. As regulations tighten and customer choices grow, M&M's success will depend on managing its existing diesel business well while innovating in EVs and hybrids to maintain market leadership and financial strength.