Car manufacturers have come up with a strategy of alluring discount rates to catalyze the sales after a severe setback of the growth rate in the month of June which stood at 1.6 percent.
This is the lowest percent gain in 26 months with an amazing gain of 30 percent during the last fiscal year and a 26 percent gain in the fiscal year 2009-10. The driving factors behind the decline of Indian car market are high interest rates and hike in fuel prices. The RBI’s move to control inflation through the policy rate hike resulted in pushing the interest rate up by 300 basis points in one year.
These elements of decline are compelling the car makers to restructure their interest rates on auto loans following the international trend of lower interest rates to attract more customers by reducing the total cost for them.
In this scenario, all the car-makers are in a race of giving discounts on their products to have a larger share of customers. While Honda gives a handsome discount price of Rs.1.7 lakh on its Honda jazz to fetch customers, Maruti Suzuki endeavors to mitigate its losses by offering rebates of more than Rs.50,000 on its Alto, WagonR and Estilo which contribute a huge chunk of sales. Also Hyundai Motor India offers a discount price up to Rs.45000 on i10 and Santo compact cars while Honda siel offers a rebate of Rs.50000 on its product City Sedan. This discount price by Honda Siel is in addition to the price cut of Rs.66000 of last month because of company’s effort for the sales revival. While the customers of Vento petrol Sedan are given loans at 6.99 percent interest rate, zero interest loans are given for the customers of Mercedes C class Sedan and Audi A4 Sedan.The sales of Jazz have declined from 1050 in the previous year to 643 in April-June quarter reporting a decline of 39 percent. It is because it could not fare with its competitors Hyundai i20, Maruti swift, Volkswagen Polo with its high premium price of more than 7 lakhs. Eventually this led the company to offer a discount price of Rs.1.7 lakh to move away the inventory of the current version and it says that it will soon introduce an attractive version of Jazz .
These moves by the car-makers are in reaction to the market forces driven by the customers’ responses to the interest rate and fuel hikes. Maruti’s chief general manager Shashank Srivastava says that because of the discount prices they have maximized benefits on high selling models like Alto and WagonR in July against the overall negative sales in June.
Through all these measures of rebates and lower interest rates, the carmakers are aiming to make the dearer nearer to the customers in a way to reduce their stocks. As the hike in interest rates is likely to continue in the succeeding months, it is envisaged that the discount rates will continue till September and beyond the festive season.