Strategic pricing, advanced features to help Tata Nexon rule SUV space: Nomura

Tata Motors’ newly launched Nexon compact SUV has the potential to become the best seller in the entire SUV category, topping both small and large SUVs, according to global brokerage firm Nomura. Attractive pricing of Nexon, coupled with loaded features in the new variants, would pose stiff competition to existing players in the SUV segment, it said.

The brokerage has retained a ‘buy’ rating on the Tata Motors stock, with a target price of Rs 786. It implies a 23 percent upside from Monday’s closing price of Rs 640.
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New Nexon attractively priced over old Nexon

The prices for the internal combustion engine (ICE) of Nexon range from Rs 8 lakh to Rs 13 lakh. The entry variant of the new Nexon is priced higher by only Rs 10,000 over the old Nexon, which offers much higher value. This comes along with a major technology upgrade as the model now offers six airbags as standard, Nomura stated in its recent note.

The new Nexon EV (electric) starts selling at Rs 14 lakh, marking a Rs 25,000 increase over the old model, which should be an attractive proposition for customers.

Also read: Tata Motors to raise commercial vehicle prices by up to 3%

In addition, multiple reports suggest that the automobile major plans to set up a dedicated sales network for its electric passenger vehicles (EVs) in this financial year. The move is aimed at providing a distinct and tailored experience to customers opting for environmentally friendly models.

Nexon ‘sales’ through a sea of competition

Tata Nexon holds the top position in the compact SUV segment. Nomura expects it will maintain its edge against other popular compact SUVs such as Maruti Suzuki’s Brezza, Hyundai India’s Venue, and Mahindra & Mahindra’s XUV300. Nexon boasts of best-in-class technology and features.

In June, the company declared that it sold 50,000 units of its flagship Nexon EV since its launch in 2020, the highest among all competitors. In the first quarter, Tata Motors sold 19,000 EV units.

EVs during the quarter registered a 104 percent increase YoY and the segment accounted for Rs 2,400 crore in revenue of the total passenger vehicle sales for the company. Moreover, the company is eyeing to sell about one lakh electric cars by the end of the year, PB Balaji, group CFO told reporters during the earnings call of the first quarter.

Nexon design, features

Nomura also says that the new EV Facelift borrows multiple design cues from the company’s upcoming “Curvv” concept. The SUV comes with a revamped front fascia, featuring a futuristic new LED light bar at both the front and rear.

Additionally, there are some impressive new innovations, such as vehicle-to-vehicle/load (V2V, V2L) charging, allowing the vehicle’s battery to charge another vehicle or a wide range of equipment. “The new additions are likely to attract customers from competition as well”, Nomura analysts said in their report.

On valuations, the stock is currently trading at 4 times FY25F EBITDA which is attractive, Nomura believes.