Despite record sales month after month and long waiting periods on almost all its models, it has increased discounts this festival season compared with last year.
Maruti Suzuki India is turning one of the most basic marketing principles on its head. Despite record sales month after month and long waiting periods on almost all its models, it has increased discounts this festival season compared with last year.
Typically, when demand outstrips supply, as in this case, a company will look to not only reduce the discounts it has been offering but even charge a premium depending on the case.
So, what gives for Maruti?
Sources say the company has increased discounts to keep competitors at bay even though it can hardly service the current demand. It has negligible inventories of about a week to 10 days, whereas competitors such as Tata Motors, Hyundai Motor India and General Motors have stocked up.
“What Maruti is doing is enticing customers with deeper discounts even as it tells them to wait for buying cars. This is quite a unique situation, but in an intensely competitive scenario, Maruti has little choice,” said a source.
The Alto F8 and K-10 are facing stiff competition from Hyundai Santro, Tata Indica and the Tata Nano —- there is virtually no waiting period for these variants and on some, equivalent discounts are gradually being made available to customers. Similarly, the new WagonR has a stiff competitor in Hyundai i10.
Ganesh festival marks the start of the festive season and discounts tend to be similar for the main festival period of Diwali.
“Surprisingly, in spite of robust demand, discounts are similar or higher on most models compared to last year. Most surprising is the discount of the recently launched WagonR. It also highlights the fact that even though demand has surprised on the upside, competitive intensity in the space would keep margins muted,” Jatin Chawla, analyst at IIFL, said in a note on Monday.
Take the case of the older Alto, Alto F8. This being a better-margin product than the new Alto K-10, Maruti is pushing the older version with deeper discounts this time.
It has offered a hefty Rs42,000 discount on the old WagonR, but even the new version of the car is selling at Rs19,000 discount, which Chawla analyst said was “surprising.”
Discount is highest for the SX4 at a whopping Rs60,000. “Despite a refurbishment, the SX4 continues to struggle; those opting for a Maruti sedan chose to go with the Dzire instead… Swift remains one of Maruti’s hottest-selling brands and the discount on it is merely Rs5,000,” the IIFL analyst wrote.
In most cases, discounts include an exchange bonus and dealers point out that these are valid only till the 23rd of the month for north Indian cities since the ‘inauspicious’ Shraddh period sets in thereafter and car buying comes to a virtual halt till the navratra period in early October.
But if the trend in previous years is any indication, dealers could offer even bigger discounts across models during the Shraddh period to keep up the buying momentum.
At present, diesel variants of the Swift and Swift Dzire are under a waiting period of over six weeks, followed by the Alto K-10 at over four weeks and the remaining cars at about three weeks each. Only the M800 and some variants of the Estilo are available on demand.
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