India's largest carmaker- Maruti Suzuki is re-evaluating its discounting strategy as its net profit slumped by 17 per cent in the third quarter, a decline of 0.01 per cent in its sales in the same period compared to last year. It's likely that the heavy discounts offered by the company have taken a toll on its earnings, forcing it to look at reducing the discounts it offers across its product portfolio. Moreover, the company also believes that offering discounts is not a good practice to sell cars as customers' expectations increase and they demand discounts throughout the year.
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Speaking to the media, R.C. Bhargava, Chairman- Maruti Suzuki India Limited said, "The policy of discounting requires a re-look. It is not a good way to sell cars by giving high discounts. Once you start offering high-discounts, customers' behaviour changes and they expect discounts round the year. We need to bring discounts down."
Sales during the third quarter weren't galloping as it usually does for Maruti Suzuki and that was more because of a lukewarm festive season. During the festive season, the entire auto industry showed a sluggish growth due to several macro-economic factors; rising fuel prices being the major one coupled with onetime payment of the insurance premium.
| Financial Quarters | Average Spent On Discounts |
|---|---|
| FY2018 Q1 | Rs. 16,600 |
| FY2018 Q2 | Rs. 15,200 |
| FY2018 Q3 | Rs. 17,900 |
| FY2018 Q4 | Rs. 13,900 |
| FY2019 Q1 | Rs. 15,200 |
| FY2019 Q2 | Rs. 18,800 |
| FY2019 Q3 | Rs. 24,300 |
In a bid to clear inventory, Maruti Suzuki offered an average discount of Rs. 24,300 in the third quarter of FY2019 which was significantly higher than many of the previous quarters. The company had offered an average discount of Rs. 15,200 per model in the first quarter of FY2019 which increased to Rs. 18,800 in the second quarter. Moreover, in the last quarter of the previous fiscal year (FY2018), Maruti Suzuki spent just Rs. 13,900 in terms of discounts per model.
Source: Business Standard
