December is the month when car makers offer discounts to clear inventories. 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 showrooms?
Well, dealers say footfall and inquiries overall have increased by around 20-25 per cent, compared with last month, but they are not expecting a bonanza in terms of sales.
Car makers 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 and extended warranty. Hyundai Motor India Ltd has rolled out 'December Delight', where one can save up to Rs 50,000, while Tata Motors Ltd is offering the 'Ultimate December Offer' across models with savings in the range of Rs 25,000 to Rs 1.5 lakh. Ford India Pvt Ltd recently had a midnight sale (8 am to midnight) with discounts up to Rs 81,000.
"Traditionally, 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 is discounts," says P Balendran, vice-president, corporate affairs, General Motors India Pvt Ltd. While currency fluctuations and rising input costs have put margins of car makers under pressure, no one could raise prices during the festive season, he added. "Also, since November-December are low months, no one would wish to raise prices now. So, all price hikes are lined up for January.”
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General Motors would raise prices by one-to-three per cent from January. "The actual impact on sales can be ascertained after some time, but footfalls have already picked up," Balendran said.
Most major car makers have announced price rises come January. Maruti is set to raise prices by up to Rs 20,000. While Hyundai is yet to announce a price rise, dealers say there might be an increase of 1.5 to two per cent across models. Utility vehicles major Mahindra and Mahindra Ltd, which has started advertising its December discount offers to pull customers, is also likely to raise prices by up to three per cent, say dealers. Toyota Kirloskar Motors Pvt Ltd is also mulling price increases by 1-1.5 per cent across models.
"Price rise is necessary as there has been significant pressure on the margins due to currency fluctuations," said a a senior official of Maruti Suzuki India Ltd, requesting anonymity. 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 said that come January, prices of Fortuner, the company’s premium sports utility vehicle, would be increased by Rs 50,000, while Innova prices could be raised by around Rs 30,000. Even prices of Etios sedan and Liva hatchback models can rise by Rs 15,000.
"The quantum of hikes by most car makers is not clear yet. As for Maruti, it has said it would raise prices by up to Rs 20,000, and considering that the average price across its models is around Rs 4 lakh, the rise is as steep as four-five per cent. But the Rs 20,000 rise can only happen in the case of more expensive models. So the uncertainty is definitely going to bring back customers to the showrooms," said Yaresh Kothari, an auto analyst with Angel Broking.
People usually tend to prepone their purchases before the annual budget in February-March, lest there are excise duty hikes announced. "Now this year with impending price hikes in January, customers might decide to take their buying decision in December itself, however, it’s still difficult to say how strong the pull of discounts and threat of price hikes would be. Definitely, compared to the current environment, there would be some boost," Kothari said.
Consumer sentiments are low at this time, mainly because of high fuel prices and interest rates. Eight of the country’s leading auto makers posted a meagre 3.7 per cent growth during November, the Diwali month, by selling 194,882 units.
According to a Society of Indian Automobile Manufacturers release: "Passenger vehicles segment grew at 10.53 percent during April-October 2012 over same period last year. Passenger cars grew 2.84 percent, utility vehicles grew 60.54 percent and vans grew -0.85 percent during April-October as compared to same period last year."
