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Business News/ Opinion / Quick Edit/  Opinion | A slight gear shift
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Opinion | A slight gear shift

In general, the auto industry’s challenge is to draw customers back to showrooms

Photo: MintPremium
Photo: Mint

India’s corporate tax rate cut, announced less than six months ago, has won another round of cheers. On Tuesday, Maruti Suzuki reported a 5.1% year-on-year increase in net profit to 1,564.8 crore for the last quarter of 2019, despite lacklustre vehicle sales. Its margins edged 30 basis points higher, even though India’s car market leader saw an increase in promotional costs and discounts. Its lower tax liability deserves much of the credit for this showing.

In general, the auto industry’s challenge is to draw customers back to showrooms. We could see a bump in the number of units sold if automakers opt for fire sales to clear stocks of vehicles that are compliant only with Bharat Stage IV emission norms. These cannot be sold after 31 March, the Centre’s deadline for a switchover to selling cleaner cars. Maruti has only a small old inventory left. It has also led the way in upping prices, which would give other companies the space to do likewise. The transition to Stage VI emission norms imposes costs, and cars getting costlier is inevitable. A market recovery would need to rely on full-price demand rather than discount-driven offtake.

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Published: 28 Jan 2020, 10:48 PM IST
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