Shares of Mahindra & Mahindra Ltd., the best performing stock in the Nifty 50 index in 2024 so far, are currently the biggest losers in the index, with losses of almost 7%.

This comes after the company slashed the prices of its Sports Utility Vehicle (SUV), the XUV700, by 10% to ₹19.5 lakh from ₹21.5 lakh (ex-showroom price).

Along with M&M, Tata Motors has also slashed the prices of its SUVs – Harrier and Safari till July 31. The price of the Harrier has been slashed to ₹15 lakh from ₹15.5 lakh, while the price of the Safari has been slashed to ₹15.5 lakh from ₹16.2 lakh earlier.

The demand in the Passenger Vehicles category has been under pressure lately. Sales in the sector also showed a notable decline in June. PV sales declined 6.77% YoY and 7.18% MoM in June, according to FADA data.

But what went wrong? Analysts believe the price cuts indicate weak demand in the segment. Extreme heat also resulted in a 15% drop in walk-ins at dealerships.

Dealer feedback points to challenges such as low customer inquiries and delayed purchase decisions in the passenger car segment.

Mahindra & Mahindra, in a statement to the stock exchanges, said that the price cut on certain XUV700 variants and the UP hybrid vehicle policy are unrelated.

The company pointed to its analyst meeting in February this year, where it said the average price needs to come down to stimulate growth.

“These well-considered measures have been included in our annual business plan based on the material cost savings achieved previously. Therefore, we do not expect any material impact on our finances,” M&M’s statement said.

Talking about the XUV700, M&M said that bookings in June were 23% higher compared to May and there are no concerns about unsold inventory. “We believe hybrid is a temporary and costly solution,” M&M further said.

Valuations are also a concern for Mahindra & Mahindra following the recent surge in its share price. Based on its FY26 price-earnings ratio, the stock is trading at 25.2 times, which is well above its five-year price-earnings ratio of 15.8 times.

Shares of M&M are currently trading down 5.7% at ₹2,760. However, the stock is up 62% in 2024 so far.

Also read: Maruti shares get a boost after UP scraps registration fees for hybrid cars