After offering record high discounts and promotional offers for over four months, Maruti Suzuki said it will end the fire sales immediately after Diwali, as part of its efforts to arrest declining margins and improve profitability. FE had first reported on Tuesday that the country's largest carmaker has silently pulled back the festive season discounts by up to 40% on models sold through the Nexa chain, including Baleno and Ciaz, post Dusshera and will gradually end all the discounts after Diwali.
The sops ranged between Rs 30,000 for models like Baleno to over Rs 1 lakh for cars like Vitara Brezza and S-cross. Shashank Srivastava, executive director, marketing & sales at Maruti Suzuki India, said the existing schemes for all the cars will end as these kind of offers are not sustainable. “We won’t be having these fire sales as dealers are not carrying enough BS-IV stock. This kind of promotional levels cannot be sustained,” Srivastava told FE.
Following a year-long slowdown in demand, Maruti Suzuki in line with the industry was offering highest-ever discounts since July-August to boost sales and clear excess inventory which had piled up since the previous festive period owing to poor retail demand.
In the April-June quarter too, the company had to offer high discounts as inventory rose to over 45 days against the normal under 30 days. As a result, net profit fell by a sharp 27.32% year-on-year (y-o-y) to Rs 1,435.5 crore and operating profit margins declined by a huge 440 basis point to 10.4%. Average discounts during the April-June quarter was at Rs 16,941, higher by 12% on a sequential basis and analysts expect the average discounts to be over Rs 20,000 in the July-September period.
Srivastava said the idea behind such high offers was to clear the BS-IV stocks and also revive the market.“Our eight models are BS-VI compliant and the BS-IV stock of these models is not available anymore. After the government did its bit, we wanted to do ours to revive the market,” Srivastava said.Starting April this year, Maruti started rolling out the BS-VI models, much ahead of the deadline of April 2020, when implementation of BS-VI emission norms become compulsory, and currently around 70% vehicles in its fleet are BS-VI compliant. Since discounts on BS-IV models were higher, most customers have been preferring them and as a result inventory of BS-IV models got exhausted.