Auto makers offer discounts to clear off inventories

Auto makers offer discounts to clear off inventories

Automobile manufacturers and dealers are offering attractive discounts to liquidate the 2011 manufactured inventories. Discounts are 10-15% higher this month compared with the same period last year. On sequential basis, the discounts are 7-8% higher than November. While the discounts are more prominent on the petrol models, reflecting high channel inventory, even a few diesel models such as Ford Fiesta have opened offers to boost slowing sales. The dealer component of the discount is expected to increase further this week.

Demand for diesel models grew 20-22% in the April-October period while that for petrol vehicles fell 14-15%. While the demand for diesel models is rising, the supply ratio is still close to 70-75%, considering capacity constraints with most of the manufacturers.

We reiterate our preference for Maruti Suzuki India Ltd and Mahindra and Mahindra Ltd based on product portfolio, new launches planned and vast sales and service network.

Edited excerpts from a report by HDFC Securities Ltd. Your comments are welcome at mintmoney@livemint.com

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