discounts: As buyers diss cars, auto companies count on offers

Carmakers and dealers are offering incentives by way of discounts, exchange bonuses, assured gifts to the tune of 5-11% – the highest in five years – in a bid to tempt buyers amid mounting inventory as sales slow, following a record FY24. The offers aren’t just on older models launched two to three years ago but even on those that went on sale barely a year ago, depending on fuel type, variants and brands. They cut across all body types – hatchbacks and sedans to SUVs. One car maker, Skoda India, has lowered prices.

Tata Motors is offering consumer benefits of up to ₹1 lakh on the second-generation Nexon compact SUV launched in September 2023. The Honda Elevate midsize SUV, also introduced around the same time, comes with benefits of ₹55,000 for corporate buyers under the Summer Bonanza Offer.

Maruti Suzuki is offering benefits of up to ₹72,000 on the Fronx that went on sale in April 2023 and up to ₹95,000 on the Grand Vitara.

Passenger car sales surged 8% to a record 4.22 million units in FY24 but have moderated since amid the heat wave, a long election season and a high base. Going by current vehicle registration trends on the government’s Vahan portal, June growth is expected to be either flat or negative. ET reported June 17 that inventory levels at dealerships across the country were at 55-60 days against the norm of 30 days seen at this time of the year.

Such incentives are typically seen either in December or during the festive season but things are different this fiscal year, said Kunal Behl, vice president, marketing and sales, Honda Cars India.

“After a strong run, the market has slowed and inventory levels are high,” he said. “Though we don’t believe in discounting, we launched the scheme to get some traction.”He attributes the slowdown to the heat wave that has swept large parts of India this summer. To encourage buyers, Honda has even extended working hours at its showrooms by an hour and half.

ETD-1-20062024

Sluggishness likely to be short-lived
Conversions to sales remain tepid at Honda showrooms – 20% for walk-ins and as low as 3-4% for enquiries, said Behl.

On Tuesday, Skoda India said it has cut prices of the Kushaq SUV and Slavia sedan and added new variants. With a price drop of up to ₹94,000, the Slavia’s base-spec variant now retails at ₹10.69 lakh and the top-spec Prestige automatic variant at ₹18.69 lakh (ex-showroom prices).

The current sluggishness will be short-lived and sales will turn the corner soon, said Partho Banerjee, head of sales and marketing at car market leader Maruti Suzuki.

“We have got very good bookings for the new Swift and even the launch of limited editions of Alto K10, Celerio and S-Presso is gaining traction,” he told ET on the weekend.

Typically, the cost of schemes is shared between dealers and manufacturers – the ratio depends on model, variant and other factors.

“The inventory pressure is so high that dealers are not worried about compromising on the 3-5% margin they make on each car,” said a car dealer. “The bigger issue is keeping stock as the interest burden increases with each passing day.”

Similar offers were last seen in December 2019 when a changeover in emission norms from Bharat Stage IV to VI prompted automakers to clear out the stock of vehicles with older emission technology, said an industry executive. Most of the schemes that are running currently were launched in June 1-15 and are valid till month-end.

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