Maruti considers shielding small-car buyers from inflation-led price hikes
New Delhi: The country’s largest automaker Maruti Suzuki India Ltd is considering a request from its dealers to take measures to protect small car buyers from price hikes as demand for the category continues to rise following the GST cut last year, according to a senior company executive.
“We are getting feedback from our channel partners that customers booking these entry-level models should get some relief from the price hike we have announced. We are seriously considering it. The final details and the date by which this discount will be allowed are not yet finalized but we are discussing it,” Partho Banerjee, Maruti Suzuki’s senior manager of marketing and sales, told reporters.
To help small car buyers, the company had launched a financing scheme with AU Small Finance Bank in April, covering four models: WagonR, Celerio, S-Presso and Alto K10. Under the program, customers can deposit an amount equivalent to their monthly car loan installments into a permanent deposit (RD) account.
The proceeds can be used as a down payment to buy a new car after three to six months, Banerjee told reporters.
Maruti increased prices ₹30,000 across all models from June due to war-related inflation in West Asia, which led to an increase in the prices of commodities such as steel, aluminum and platinum group metals, among others, used in automobiles. Other automakers like it too Hyundai Motor India, Mahindra and Mahindra and Tata Motors Passenger Vehicles had earlier announced price increases.
Banerjee said, “There is a huge pressure forcing us to increase prices due to the increase in commodity prices. We tried to digest this for a while, but it is impossible to postpone price increases for a long time. But yes, we are considering whether a price protection window can be introduced to protect small car buyers from this inflation.” Banerjee said, adding that dealers have suggested continuing to increase prices of larger SUV models.
Maruti’s efforts to sustain demand in small cars also comes at a time when it has launched the flex-fuel variant of its entry-level car WagonR in a bid to increase the share of clean fuel technology in its overall sales. In anticipation of cheaper E85 flex fuel at gas stations, the company noted on Thursday that the vehicle could be an efficient and cleaner option for consumers.
Small car orders for Maruti increased on the back of cuts in goods and services tax (GST) in September last year, but the company struggled to fulfill these orders due to production constraints.
Since the commissioning of the new production line in Kharhoda in April, entry-level sales Mini cars reached 32,341 units with a cumulative increase of 147% in April and May. Passenger car sales, which include hatchbacks and sedans, increased by 42% to 400,366 units in the same period. According to the latest sales data announced on June 1, the company’s total sales increased by 33% in the same period, reaching 400,366 units.
One of the reasons why the company experienced a strong boom in small car sales was that it did not increase the prices of its models until June and that the 10% GST benefit introduced last year allowed it to stay on the market longer even as pressure for price increases increased.
While small car major Maruti Suzuki has seen a rise in entry-level car sales and bookings since the GST Council announced tax cuts in September last year, Mumbai-based Tata Motors Passenger Vehicles has also realized the importance and growth potential of the segment.
“The realization that customers are not moving away from hatchbacks because for millions of Indian families, this is still where the first four-wheeled mobility journey begins,” Shailesh Chandra, managing director and CEO of Tata Motors PV, told the media last week ahead of the launch of the facelifted hatchback Tata Tiago.
On the financing plan, Maruti Suzuki’s Banerjee said customers will earn interest on the monthly amount they deposit, which will be equivalent to the monthly EMI installments of the car they want to buy. After 3 to 6 months, the consumer can take the amount accumulated in his account and make a down payment on the car loan he will use to buy the car he wants.
