Discounts, impending price hikes seen driving up auto sales this month

Some analysts view price hikes announced by car makers as a sales strategy to clear their BS-IV inventory

Automobile manufacturers’ decision, amid rising input costs, to increase the price of their cars and two-wheelers from January 2020 is expected to push the sales of passenger vehicles by 2-4 per cent in December. Besides, discounts and other schemes being offered should also prod buyers to advance their car purchase, say dealers.

Among the companies that have announced price hikes from January are Maruti Suzuki, Hyundai, Nissan and BMW.

Though it was not easy to predict by how much the sales might increase this month, analysts, car companies and dealers were expecting decent annual growth in passenger car sales, said Ashish Harsharaj Kale, president of the Federation of Automobile Dealers Association (Fada).
 
Some analysts estimated this growth at 2-4 per cent. Shashank Srivastava, executive director (marketing & sales), Maruti Suzuki, said: “Of course, it is possible. However, it is very difficult to quantify the magnitude and place a number. Some customers may also have changed their mind and pushed their sales to December from November. We are cautiously optimistic of positive demand.”
 
Srivastava added that discounts being offered now were at an all-time high, and not sustainable. "So we want to tell our customers that the best time to buy a car is now."

Mitul Shah, an auto analyst with Reliance Securities, views price hikes announced by car makers as a sales strategy to clear their BS-IV inventory. The announcements would certainly make buyers advance their decision and push sales, he said.

The price hikes are taking place across a wide range for cars and two-wheelers. Generally, the prices rise by one per cent every January. But the average price increase this time will be slightly higher, in order to cover future cost escalations due to BS-VI rollouts, according to Shah.

It should be noted that the January hikes would be followed by another round of price increase the sales of BS-VI vehicles begin before April 2020.

The price-hike announcements had started with Maruti Suzuki, India's largest carmarker. Though it had said the prices of its vehicles would increase from January, it had not clarified by how much. Hyundai, which was the next to announce, also did not disclose the extent of price rise.

Nissan, German luxury car maker Mercedes-Benz and the country’s largest two-wheeler maker Hero MotoCorp had been the next in announcing price hikes. Nissan and Datsun India had announced a five per cent price increase across their product portfolio — from Rs 14,000 for Datsun RediGO to Rs 68,000 for Nissan Kicks. Mercedes-Benz said it had revised the prices of its entire model range by up to three per cent.

"The discounts at present are lower than those offered during the festive season, but they will increase to the earlier level in the second half of December as part of year-end discounts," said Shah.

For example, Maruti will offer discounts of around Rs 1 lakh, including corporate ones, exchange offers and corporate offers. Hyundai’s discounts and other benefits will go up to Rs 2 lakh. Nissan has announced discounts of up to Rs 40,000, besides an exchange bonus of up to Rs 40,000 and corporate discounts of up to Rs 10,000 on Nissan Kicks.

Fada numbers show that passenger vehicle registrations grew one per cent to 257,271 units during November, compared with 255,535 units in same month last year. Fada’s Kale said automobile retailers had seen a stronger demand during November 2019, and some of that would have spilled over to post-festive season.