Haryana sop prompts Maruti to cut prices

Maruti Udyog (MUL), India's largest car-maker, has lowered prices between Rs 3,000 and Rs 5,000 on its cars following a reduction in the concessional central state tax (CST) offered by the Haryana government. The company has asked all its dealers to pass on the benefit to customers.

The state government of Haryana, where MUL's factory is located, has dropped the concessional CST - a tax on inter-state sale of goods - from 3 per cent to 2 per cent.

This is a further concession over an earlier agreement, under which Maruti paid a concessional CST of 3 per cent. This was a percentage point lower than the CST on other products and was given subject to the company dispatching all its cars from warehouses in the state.

The concessional rate was reduced by another percentage point from April 1st, the same day the Centre reduced the ceiling on CST from 4 per cent to 3 per cent across the country.

"This small gain will dilute the impact of hardened interest rates that have impacted demand adversely, said Jagdish Khattar, managing director, MUL.

Khattar added that he expected demand to stabilise in three or four months after consumers get over the initial shock of higher interest rates and the rates stabilise.

Interest rates on car loans have jumped 4 to 6 per cent in the past few months adding Rs 3,000 to Rs 6,000, depending on the car model, on annual loan repayment bills. Meanwhile, MUL has also decided to introduce a new series of engines in all its cars. A new-generation M-Series engine has been introduced in the new sedan SX4, which will make its debut in the first week of May. Existing models M-800, Zen, Wagon R and Esteem will also have the new series over the next two years.

"We are making heavy investments to move from the current Euro III engines to future-ready Euro IV and Euro V engines that would meet our demand till 2015," Khattar said.

The new engines will roll out later next year in phases for all the models currently under production, he added. The change in technology would help Maruti gain share overseas.

MUL has also brought in its fourth platform with the introduction of the 1.6 litre SX4 sedan, which is pitted against the Honda City, Hyundai Verna, General Motors's Optra and Ford Motor's Escort. This platform will be the base to introduce all MUL's new bigger cars.

MUL currently has three platforms. One is used to manufacture the M- 800 and Swift.

The Esteem is manufactured from the second platform, and the Alto, WagonR and Zen Estilo, are manufactured from the third.