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New Delhi, Nov 21: The launch of the aggressively-priced 1.2 litre petrol Indica Xeta by Tata Motors has sparked a major price war in the entry segment of the small car market with the country's largest car maker Maruti Udyog Ltd (MUL) covering its flanks with generous discounts on its largest selling volume cars, the Alto and the Maruti 800.
Tata Motors has launched the 1.2 litre Xeta with an inaugural discount of Rs 25,000 on the Rs 2.54 lakh (ex-showroom, New Delhi) price tag. Fearing erosion in market share, Maruti is offering gift cheques of Rs 15,151 and Rs 11,111 respectively on old war-horse Maruti 800 and the Alto. The base model of the Alto and the Maruti 800 is priced at Rs 2.33 lakh and Rs 1.91 lakh in New Delhi (ex-showroom).
Tata Motors introduced the 1.2 litre Indica to leverage the lower excise duty proposed in Budget, 2006 to promote small car production in the country. Petrol cars up to 1.2 litre and diesel vehicles up to 1.4 litre engine capacity are charged a concessional excise of 16% against the normal 24% charged on all other cars.
The new 1.2 litre Xeta is being rolled out on the same platform as other Indica models. The Tata strategy is aimed at upping the capacity utilisation of the Indica platform, which is capable of producing around 22,500 units per month. Last month Tata Motors sold around 11,000 units of the Indica. "We are aiming to do larger volumes in coming months with this model. We expect to beat the competitors soon," a Tata Motors spokesperson told FE. "Slashing price by Tata Motors is aimed at outpacing the sales of both the compact cars of Maruti and creating larger sales base for itself," said an auto analyst.
In October this year, Maruti sold 6,354 units of 800, down 30.07% as compared to 9,087 units in the same month last fiscal year. In April-October, the company sold 46,799 units of the Maruti 800, down 5.07% as against 49,301 units in the period last fiscal.
In the fag end of the financial year, carmakers offer huge discounts on their products to clear inventories and build up volumes. Customers resist buying cars at the end of the year and rather prefer buying in the beginning of the year for a higher resale value.
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