Mahindra & Mahindra’s stock price has corrected ~15% in the past two weeks vs the Nifty which was down ~3%, largely after news flows of Tesla entering India, with a reduced duty structure. Contrary to news flow, we believe Tesla is more likely to enter the country with the pricier Model Y and not even the Model 3, leave alone the yet to be launched Model 2.

Tesla prices in India are likely to be ~4x+ average selling prices of vehicles currently and ~2x over the next five years if the Model 2 is launched. In the EU, the US and China, this ratio currently is ~1.0-1.5x; 

Tesla’s BEV market share is 10-15% in the EU & China and ~44% in the US. This translates to PV market share of less than 5% in these regions. “If we were to assume a 10-15% market share in BEV in India by FY30E, Tesla would garner a mere ~1.5-2.0% share of PV for 15% BEV penetration in base case and 3.0-4.5% for ~30% BEV penetration in a bull case,” said Elara Securities.

Revise to Buy with an unchanged TP of INR 3,654: Given ~15% stock price reaction in the past two weeks, we revise to Buy from Accumulate with an unchanged SOTP-based TP of INR 3,654. The stock is trading at ~11.9x FY27E EV/ EBITDA (ex of subsidiary), cheaper than Maruti Suzuki’s 12.5x. Failure of BEV launches and tractor downcycle are key risks to our call.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.