After Maruti Suzuki, other automakers might soon cut car prices

NEW DELHI : The steps taken to reverse the economic slowdown, along with the upcoming festive season offers, might have the potential to accelerate the automobile sector's sales growth, industry insiders opined.

The trend of reduced prices on the back of recent corporate tax sops is expected to catch-up after car market leader Maruti Suzuki cut prices on Wednesday.

There had been scepticism in the auto industry whether a cut in corporate taxes will lead benefit consumers. The government has yet not lowered GST rates for automobiles despite persistent demands by the industry.

Nonetheless, the auto giant announced an immediate ₹5,000 cut in prices of its bestselling cars including all variants of Alto 800, Alto K10, Swift Diesel, Celerio, Baleno Diesel, Ignis, Dzire Diesel, Tour S Diesel, Vitara Brezza and S-Cross.

Besides, other companies such as Piaggio India and Isuzu Motors India announced festive season discounts.

On its part, Maruti Suzuki decided to reduce the price by ₹5,000 on ex-showroom price, "proactively and voluntarily" sharing the benefits of corporate tax reduction with customers.

Maruti said it is 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.

Last month, Finance Minister Nirmala Sitharaman announced several measures to rescue the auto sector, including lifting a ban on purchase of vehicles by government departments, and allowing additional 15 per cent depreciation on vehicles bought till March 2020 among others.

However, the industry had demanded more measures, like reduction in the Goods and Services Tax (GST) rate on automobiles from 28 per cent to 18 per cent, along with a vehicle scrappage policy.

On September 20, Finance Minister Sitharaman reduced the effective corporate tax rates to 25.17 percent (inclusive of all cess and surcharges) from 30 percent for all domestic companies.

The development comes as the automobile industry suffers from a slowdown, caused by several factors like high GST rates, farm distress, stagnant wages and liquidity constraints.

The industry's sales and production levels have dramatically plunged, leading to job losses. In August, all major OEMs consisting of passenger, commercial, two- and three-wheeler manufacturers have reported a massive decline in domestic sales.

As per Society of Indian Automobile Manufacturers' August sales figures, the overall sectoral offtake in the domestic market has plunged 23.55 per cent to 1,821,490 units, from 2,382,436 units sold during the corresponding month of the previous year.

Moreover, the industry has estimated that around 15,000 contractual manufacturing jobs have been lost and another million are at risk, if the slowdown is not reversed.