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With OEMs looking to drive down BS4 inventories, car discounts likely to continue till December

S. Ronendra Singh New Delhi | Updated on October 31, 2019 Published on October 31, 2019

The deep discounts on offer make this the best time to buy cars, say analysts

Diwali may be over, but the festive discounts in the automobile sector may continue over the next two months, according to analysts, who also say this is the best time to buy cars.

The discounts could be as high as Rs 4 lakh, and even more for premium models.

While announcing the company’s quarterly results recently, R.C. Bhargava, Chairman, Maruti Suzuki India, had said that this was the right time to buy cars, as discounts were at their highest this year.

Most OEMs raise their prices in January to cover for previous discounts, and as new registration dates come into effect. Customers also tend to wait till January to buy a new car, so that they can get a better resale value.

At the same time, there are many customers who do not time their purchases in this manner; they buy vehicles at any time of the year, even during the year-end.

BS4 models in demand

Another factor for the discounts is that the companies are keen to clear their stocks of BS4 vehicles before the new norms kick in in April 2020. Post March 31 next year, one will not be able to register a BS4 vehicle.

Surprisingly, many customers are queuing up to purchase BS4 models, as they expect that the pricing of the same model with a BS6 engine, would be much higher.

"We find that customers are keen to purchase the BS4 version of the models to make the most of the discounts available on them right now, and also because BS4 cars are not affected if they are run on BS6 fuel. However, customers with BS6 vehicles may face a problem if the same fuel is not readily available, which could be a problem for those travelling outside Delhi-NCR," an executive at one of the manufacturers told BusinessLine.

It is, therefore, not surprising that many OEMs have delayed the launch of their BS6 models till January-February.

Not many companies have launched BS6 vehicles so far. Maruti Suzuki was the first mover, launching petrol versions of the Alto 800, WagonR, Baleno, Dzire, Ciaz, Ertiga, XL-6, and its most recent launch, the S-Presso, which account for 75 per cent of the petrol sales.

The company has a total of 16 brands, half of which have been converted to BS6 models. However, according to analysts, the conversion was done too early, which is why sales have been hit.

"Since the BS6 fuel (petrol) is currently available in a few markets -- Delhi-NCR being the biggest -- buyers for Maruti's BS6 vehicles are restricted to these areas. People know that BS4 vehicles will not be affected if they are run on BS6 fuel, but BS6 engines could be affected if they are run on BS4 fuel," said an industry watcher.

No inventory overload

Experts put the demand for BS4 vehicles down to the approaching deadline for registration of such vehicles (March 31, 2020), and not to excessive inventories with OEMs.

"Stocks are limited and most of the vehicles are made against bookings," said an executive with a leading car manufacturer.

For instance, Maruti Suzuki, which has only two diesel models -- the Vitara Brezza and S-Cross with a BS4 engine -- is manufacturing them on demand basis, a company source said. The BS6 petrol versions of these vehicles will be launched during the Auto Expo in February.

However, companies that have seen stocks grow over many months, are offering higher discounts, said one of the analysts. "Companies like Nissan, Volkswagen and Audi have stocks left and are offering heavy discounts on their products," said a Delhi-based analyst.

Therefore, companies that are unable to clear their BS4 stock could announce further discounts in the coming months.

"Such OEMs are doing everything to clear stock. For instance, an OEM had a particular model sent from Agra to Bareilly to clear stock," the analyst added.

Published on October 31, 2019
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