Discounts, impending price hike increases footfall at car showrooms

December is that time of the year when carmakers offer discounts galore to clear inventories. And this year it is coupled with announcements of price hikes come January. Will the dual effect of discounts and impending price rises bring the customer back to the showrooms?

Well, dealers say footfall and enquiries overall have increased by around 20-25 per cent compared to last month, but are not expecting a bonanza month in terms of sales.

Carmakers are offering December discounts in the range of Rs 15,000 to Rs 1.5 lakh in the form of cash benefits, exchange offers, accessories as well as extended warranty. Hyundai has rolled out 'December Delight', where one can save upto Rs 50,000,Tata Motors is offering the 'Ultimate December Offer' across models with savings in the range of Rs 25,000 to Rs 1.5 lakh. Ford recently had a midnight sale (8 am to midnight) with discounts upto Rs 81,000.

"Traditionally, the months of November and December are low months with the festivals over. People usually wait for new models, and also for a new year registration for their car to ensure higher re-sale values. One encouragement for them to come back to showrooms are discounts", says P Balendran, vice president, corporate affairs, General Motors India. He added that while currency fluctuations and rising input costs have put margins of carmakers under pressure, no one could raise prices during the festive season. "Also, since November-December are low months, no one would wish to raise prices now. So, all price hikes are lined up for January", he explained.

General Motors would be raising prices by 1-3 per cent from January. Balendran claimed that footfalls have already increased at the showrooms. "The actual impact on sales can be ascertained after some time, but, footfalls have already picked up", he said.

All major carmakers have announced price rises come January; Maruti is all set to raise prices by upto Rs 20,000 from next month. While Hyundai is yet to announce a price rise, dealers say that there might be an increase of 1.5 to 2 per cent across models. Mahindra & Mahindra, which has started advertising its December discount offers to pull customers, is also likely to raise prices by upto 3 per cent, say dealers. In line is Toyota Kirloskar Motors, which is mulling price increases by 1-1.5 per cent across models.

A senior Maruti Suzuki official said, "The price rise is necessary as there has been significant pressure on the margins due to currency fluctuations." As an Angel Broking report highlighted, "We expect the price increase to slightly offset the negative impact of foreign exchange movement on the operating margins of the company."

A city-based Toyota dealer informed that come January, Fortuner prices would be increased by Rs 50,000 while Innova prices can be raised by around Rs 30,000. Even prices of Etios sedan and Liva hatch can rise by Rs 15,000.

Yaresh Kothari, automobile analyst with Angel Broking said, "The quantum of hikes by most carmakers is not clear yet. As for Maruti, it has said, it would raise prices by upto Rs 20,000, and considering that the average price across its models is around Rs 4 lakh, the rise is as steep as 4-5 per cent. But, Rs 20,000 rise can only happen in case of more expensive models. So, the uncertainty is going to bring back customers to the showrooms."