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Discounts fly as car sales dip

Monday, 12 May 2014 - 4:05am IST | Place: Mumbai | Agency: dna

After a slow start to the new financial year, car companies and dealers have started increasing discounts on various models. Car makers were offering heavy discounts on different models till March owing to slowdown. 

The discounts were expected to come down from April, as most carmakers passed on the benefits of 4-6% excise duty cuts announced by the government in February to stimulate demand. However, the new financial year had a slow start, with car sales declining 10.15% in April this year over the same month in 2013, as per the data released on Friday by the Society of Indian Automobile Manufacturers (SIAM). Domestic car sales in April dropped to 135,433 units in April as compared with 150,737 units a year ago.

"This is the biggest decline since May 2013, when car sales dropped by 11.7%," SIAM deputy director general Sugato Sen told reporters in New Delhi. With falling sales, dealers are finding it difficult to push the older models, though new models are doing well. According to the dealers, most car manufacturers have hiked discounts in May.Maruti Suzuki, the biggest car manufacturer, has increased discounts on models like Alto 800 and Wagon R by Rs 5,000 each in May over April prices. While Hyundai cars – including Eon and i10 -- are seeing some additional discounts.

Tata Motors, on the other hand, is offering additional benefits (like exchange and loyalty bonuses) on models like Manza. New launches like Ford EcoSport, Hyundai Grand and Xcent are not attracting any discounts as they continue to evoke demand.

Despite the hike in discounts, dealers do not see any change in consumers' sentiment, which has been depressed by rising fuel prices, higher interest rates and overall economic slowdown. "Discounts are a phenomenon of demand-supply gap. Demand has not picked up the way we had expected, while there are some signs of revival of the economy. However, for us, the new launches are doing well, including Grand and Xcent," said Rakesh Srivastava, senior VP, sales & marketing at Hyundai Motor India.

"We are seeing some increase in footfalls since we hiked the discounts. However, the conversion continues to remain weak," said a Mumbai-based Chevrolet dealer. The industry, meanwhile, sees things improving post general elections. "There are no signs of revival. We were expecting things to improve; however it is surprising that the companies are increasing discounts to push sales. Retails in April have been poor," said Nikunj Sanghi, a dealer from Rajasthan.

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