Numbers Game: Auto Majors Reap On Price Cuts

New Delhi, July 26 | Updated: Jul 28 2004, 05:12am hrs
Price reductions seem to have a direct co-relation to pushing up sales. Recent price cuts have infused a new lease of life to some models, including luxury car Suzuki Baleno, multi-utility vehicle Versa, mid-size car Ford Ikon and compact car Maruti 800.

Baleno sales are up 250 per cent in first quarter April-June this year at 1,441 units. Earlier this year, Maruti Udyog went for a reduction of about Rs 25,000 on the Baleno which now carries the price tag of Rs 6.29 lakh (ex-showroom Delhi). But the other variant of Baleno, which was launched at Rs 5.6 lakh, is more popular, and even enjoyed a waiting period initially, say company officials.

Compact car Alto has also been a big success after the Rs 23,000 price reduction effected in September last year, and subsequently the non-air conditioned (AC) variant launched in March this year at Rs 2.3 lakh (ex-showroom Delhi). Alto sales have zoomed by about 240 per cent to 27,886 units for the April-June quarter.

The price reduction last year and the introduction of the non-AC version has increased sales significantly,, a Maruti Udyog official told FE.

Even in the case of multi-utility vehicle, Maruti Versa, the introduction of a standard version (without AC) with a price tag of around Rs 3.29 lakh has helped, with sales increasing by 55 per cent in the first quarter this year to 1,253 units.

Price does play an important role particularly for the economy and mid-size segments in the Rs 3-5 lakh range of vehicles, says an auto industry watcher.

In a yet another case, Ford India launched the 1.3 litre Flair model just under Rs five lakh last year. Initially, the car was to be made available for three months only. Seeing the numbers skyrocketing, the company decided to make it a permanent fixture. Eyeing higher numbers, General Motors India launched the Corsa Sail to get a toehold in the compact car (B) segment.

The latest to join the bandwagon of price cuts is the mid-size car, Esteem which was made Rs 40,000 cheaper at Rs 4.25 lakh (ex-showroom Delhi).

The market is offering huge discounts on most cars. These companies decided to institutionalise them into an economy package, says auto expert Murad Baig.

Market experts say that brand image of the cars is hardly affected with the spate of price corrections as there is a huge consumer base waiting to lap up these models. This is evident from the fact that their sales have gone up significantly over a period.