Maruti slashes prices of some cars by ₹5,000 in bid to boost demand

The move by India’s largest vehicle manufacturer in the run-up to the Navratri and Diwali festivals, and Durga Puja comes in the wake the Union government drastically reducing corporate taxes.

Maruti has brought down the prices of Alto K10 and 800, and Celerio, as well as the diesel variants of Swift, Dzire, Vitara Brezza, S-Cross and Baleno.

“The new prices will be applicable from 25 September across the country. This reduction of price will be over and above the current promotional offers for the company’s vehicle range. The company is optimistic that the price reduction will bring down the cost of acquisition, especially for entry-level customers. This announcement around the festival season will help boost customer sentiment and revive the market to create demand," Maruti said in a press release.

Maruti’s festive offers include discounts of ₹40,000 to ₹100,000 across different models, to lure potential customers back to the showrooms.

Ratings agencies and brokerages were expecting original equipment manufacturers (OEMs) to cut product prices to boost demand, after the reduction in corporate taxes.

“Under the current weak demand conditions, OEMs are expected to pass on some of the benefits of tax revision to the end consumers. This implies that the price correction in coming months will, to an extent, address demand-side issues," said Pavethra Ponniah, vice-president and sector head of ratings agency Icra.

The government had on 20 September reduced corporate tax rates from 30% to 22% to boost consumer demand and increase spending by private companies. The effective tax to be paid by the companies, including surcharge and cess, will be 25.17%.

Automakers exploring opportunities to start manufacturing in India stand to benefit more, as the corporate tax rate for new manufacturing companies was cut from 25% to 15%, provided they start operations by 31 March 2023.

Domestic sales of passenger vehicles had plunged 31.6% in August to 196,524 units from a year earlier, according to data released by the Society of Indian Automobile Manufacturers (Siam).

This was the 10th straight drop in domestic passenger vehicle sales and the worst since Siam began compiling monthly sales data in 1997-98. Passenger vehicle sales have been declining since July 2018.

“We are currently offering discounts ranging from ₹40,000 to ₹100,000 on our vehicles. We are also focusing on bringing down the cost of ownership, irrespective of the steps to be taken by the government to revive consumption demand, as our internal study has shown an increase in vehicle prices, with the introduction of new regulations as one of the biggest reasons behind the current decline in sales," said Shashank Srivastava, executive director, sales and marketing, Maruti Suzuki, in an interview with Mint earlier this month.

Maruti had cut production by one-third in August as it expected muted demand during the festive season. Vehicle production at Maruti’s three plants, including the one in Gujarat owned by its parent Suzuki Motor Corp, plunged 34% year-on-year (y-o-y) to 111,370 units in August.

Maruti’s domestic wholesales in August fell 36% y-o-y to 94,728 units. This was the third time since July 2017 that the firm has dispatched fewer than 100,000 vehicles to its dealerships in a particular month.