Maruti Suzuki cuts discounts on popular models, all sops to go by September

Maruti Suzuki has started lowering discounts on several models to drive up sales before it phases out the practice later this year. Dealers FE spoke to said discounts on popular models such as Alto and Dzire were trimmed from Rs 60,000 earlier to Rs 40,000 in April. The discounts would be further lowered and fully phased out by around August or September.

Similarly, discounts on compact SUV Brezza and premium hatchback Swift have been cut this month by around Rs15,000-Rs 30,000 and Rs 35,000, respectively.

In January, Maruti chairman RC Bhargava said buyers should not get used to discounts and the company should relook the discounting policy as it was not a good way to sell cars. “Once you start offering high discounts, customer behaviour changes and they expect discounts round the year,” Bhargava had said.

Speaking to FE, Bhargava said as a general principle, discounting is not a viable way to do business and hurts the growth prospects in the long term. He, however, added that he was not aware of any recent cuts in discounts.

Maruti Suzuki did not reply to an email query on the subject.

While Maruti does not typically offer discounts on newer models, the sluggish sales since October last year had prompted it to do so. The discounts accelerated during December, a month when discounts peak as companies clear the calendar year’s inventory. Since festival sales were lacklustre and stocks with dealers were high, the discounts continued through January.

They touched a record high during the October-December quarter when the company posted a 17.21% (year-on-year) decline in its net profit at Rs 1,489 crore.

During the quarter, Maruti offered an average discount of Rs 24,300 per vehicle, a record high and up from the average discount of Rs 18,800 seen in the September quarter.

During an analyst call after the December quarter earnings, Maruti Suzuki CFO Ajay Seth said high discounts were prevalent across the industry as the idea was to push the retail sales. “Discounts during Q3 were at an all-time high. So, I think we will be at lower discounts compared with where we were,” he had said.

Apart from lowering discounts, Maruti has increased prices of its various models twice so far this year on account of rise in commodity cost, mandatory high-security registration plates and addition of various safety features, including ABS (anti-lock braking system).

Maruti closed FY19 with a volume growth of 5%, much lower than around 14% in FY18. To adjust to the falling demand, it has cut production of vehicles at all its three plants December onwards.