Automobile companies depending on discount offers to boost sales this festive season as no respite from GST Council

With no respite from the GST Council on rate cut, the automobile companies are now purely depending on the discount offers to boost sales this festive season . Some companies like Maruti Suzuki India (MSIL) are giving additional reduction in factory prices, over and above the discounts.

MSIL has announced voluntarily to share the benefits of corporate tax reduction with its customers, and reduced the price of select models by Rs.5,000 on ex-showroom price.

Passing on the tax benefits

This reduction of price will be over and above the current promotional offers that ranges between Rs 65,000 and Rs 1.01 lakh for the company’s vehicle range. Maruti is the only company which is passing on the tax reduction by government to the customers. None other companies are doing it yet, apart from their usual festive offers.

For instance, Hyundai Motor India has festive offers ranging from Rs.65,000 to Rs.95,000, giving benefits like extended warranty and insurance till September 30. Companies like Tata Motors and Honda Cars India are also offering similar schemes running up to Rs 2 lakh and Rs 4 lakh, respectively.

However, there are players like MG Motor India which is going in opposite direction and instead of discounts , it is increasing the price of its only vehicle in production -- Hector SUV -- by 2-3 per cent from September 29. The company has around 19,000 units of Hector to be delivered from the last bookings, which were closed in July as the company had a limit to produce that much cars only (around 28,000) for this calendar year.

Rajeev Chaba, President and Chief Executive Officer, MG Motor India , explained that the price increase from the next bookings is a natural step because the current pricing were part of the introductory price announced during the launch in June.

“We will hike the price by 2-3 per cent because the current price is the introductory price. From the next booking that starts on September 29, we will announce the price hike," Chaba had told BusinessLine .

New entrant

The company may succeed in doing so even at this time because the demand for the new entrant is still there in the market. Chaba said even now if there is a cancellation of about 30 cars, the online enquiry is around 300 on the same day. Going forward, now the industry is closely watching on how the festive offers improve sales, and if the offers bring more footfalls to their showrooms.

Like MSIL said it was optimistic that the price reduction will bring down the cost of acquisition especially for the entry-level customers. "This announcement around the festive season will help boost customer sentiment and revive the market to create demand," it said.

So, if the company succeeds in doing so and gets positive numbers in sales, thereby growing month-on-month, other companies would be in trouble. Trouble in the sense that questions will arise from their management to sales officers that 'if Maruti could do, why not us?'.

The competition is expected to rise from next month, as the Navratras will kick in north India and that is the time when companies even announce 'midnight offers', giving maximum discounts to customers.

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