Maruti car sales at all-time high as discounts fly high to reduce inventory

maruti

India’s largest carmaker, Maruti Suzuki Ltd, pumped up discounts last month, boosting December retail sales to its highest ever and considerably trimming its inventory.

Maruti’s showroom sales in December was around 220,000 units, 18.18% higher than around 180,000 units sold in the same month a year ago, according to two people aware of the development.

This is also the company’s highest ever retail monthly sales, the people cited above said on condition of anonymity. Like other carmakers in India, Maruti does not provide retail sales and counts despatches to dealerships as sales.

Maruti increased discounts as it wanted to start the new year with a lower inventory, the first of the two people said.

“Lots of customers postponed their vehicle purchases in 2018 because of the rise in petrol and diesel prices and the adverse impact of the NBFC (non-banking financial company) crisis on availability of credit and the decline in the stock market. Now, with such huge discounts being offered on every vehicle, customers realized it was the best time to buy a vehicle,” this person said.

An email sent to Maruti Suzuki’s spokespersons on Friday remained unanswered.

The meltdown at Infrastructure Leasing and Financial Services Ltd towards the end of last year led to a credit crunch among NBFCs, squeezing loans for retail borrowers including car buyers.

According to the people mentioned earlier, the company offered significant discounts on all products at its Arena and Nexa chain of dealerships, aided by a slight recovery in customer sentiment in the second half of December.

Among others, Maruti offered a ?25,000 discount on its compact SUV Vitara Brezza, one of India’s top-selling models with a waiting period of more than a month, said one of the two people cited earlier. On premium products such as the new Ciaz sedan and the S–Cross crossover, discounts ranged from ?70,000 to ?90,000. Maruti was already offering high discounts on Swift, Dzire and Baleno, among others, despite most of these cars being bestsellers in their respective sub-segments.

The sales feat comes at a time of slump and might have helped Maruti reduce inventory, but the effect of discounts is bound to show up in the company’s realization per unit in the October-December quarter.

According to the second person cited earlier, Maruti reports its sales figures to parent Suzuki Motor Corp. at the end of the year, and was forced to offer deep discounts since the second half of 2018 was quite a disaster for the automobile industry.

The company has corrected production of vehicles in the last two months and shut its plant for a week in December for annual maintenance.

“The January wholesale numbers that will be reported by the company will give an actual picture of the reduced inventory. Apart from the huge discounts, Maruti’s retail sales numbers also point towards the slight recovery in the customer sentiment,” said the second person.

According to Avik Chattopadhyay, founder of brand consultancy firm Expereal, retail sales numbers in December have always been healthy due to the high discounts offered and also since customers don’t want to buy vehicles manufactured in the previous year as that would mean a 10-15% reduction in resale value.

“It is a good strategy adopted by the company because to sell these vehicles in 2019, the discounts required to attract customers would be almost double, since Indian customers don’t want to buy vehicles manufactured in the previous year unless discounts are steep,” explained Chattopadhayay.

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