Maruti Suzuki Ciaz sales hit big hurdle; reason is a big surprise

Sales of Maruti Suzuki’s mid-size sedan Ciaz seem to have come under pressure with 43% tax (28% GST plus 15% cess) getting levied on hybrid cars. Launched in 2014, Maruti unleashed Ciaz’s mild hybrid variant last year, which attracted just 12.5% excise duty compared to a 28% on any other car in the segment. Hence, Ciaz became most popular choice of customers in the segment. However, after the GST roll-out, taxes on hybrid cars were hiked to the same level – 28% GST plus 15% cess as any other car with a more than 4-metre chassis and this has substantially impacted the fortune of the sedan. Going by the July to October sales data, Ciaz’s volumes slid though it still managed to retain leadership in the segment. In July, Maruti dispatched 6,377 units of Ciaz; in August, it was flat at around 6,457 units; volumes dipped to 5,603 units in the festive month of September; and in October, it further fell to 4,107 units – a decline of 35% y-o-y, though on a high base. Maruti Suzuki, as a company though, will continue to invest in the mild hybrid technology (SHVS) and is expected to launch a hybrid version of its popular hatchback Swift. The new version is expected to be launched by the end of the fiscal. “Maruti as a company will continue to invest in smart hybrid technology in future since it is much more cleaner in terms of emissions. Customers who buy vehicles with hybrid engines also understand that. Hence, we will continue to invest,” said RC Bhargava, chairman, Maruti Suzuki, in a press conference.

In the first six months of the current fiscal, Ciaz’s volumes increased by just 7.9% y-o-y to 34,135 units. After the introduction of the GST, prices of Ciaz jumped by Rs 80,000 to Rs 1,00,000 depending in the state in which it is being bought. In FY17, volumes of Ciaz increased by 18.8% y-o-y to 64,448. In FY16, too, volumes of the premium offering from Maruti spiked by a whopping 67% y-o-y 54,233 units.

“The implementation of the goods and services tax has discouraged purchase of hybrid vehicles among car buyers. For instance, while earlier about 70% of the total Ciaz’s sales came from the hybrid variant, after the GST implementation, it has come down to a mere 32%. Meanwhile, sales of the hybrid variant of Ertiga came down to 50% from 70% of overall Ertiga sales earlier,” said Ajay Seth, chief financial officer, Maruti Suzuki, in a conference call with analysts.