Maruti hits reverse gear on discounts at Nexa outlets

In volume terms, Nexa contributes around 20% of the company’s monthly sales. A Baleno till early October was sold with a total cash discount of around Rs 35,000, including those offered by the company and the dealers.

By: | Published: October 22, 2019 7:11 AM

Maruti Suzuki has pulled back the festive season discounts by up to 40% on models sold through the Nexa chain, which include popular cars such as Baleno and Ciaz, after Dussehra. The move comes as the dealer inventory has reached the near-normal of 21-30 days against the earlier 40-45 days, people aware of the development said.

However, sops offered on models sold through Arena channel of dealerships, including WagonR, Swift and Dzire, have not been lowered as the inventory of those vehicles are still above normal.

In volume terms, Nexa contributes around 20% of the company’s monthly sales. A Baleno till early October was sold with a total cash discount of around Rs 35,000, including those offered by the company and the dealers. The discounts on Baleno have now come down to around Rs 20,000 and dealers have been told to refrain from offering additional discounts other than those approved by the company. However, other sops, including exchange bonus and free five-year warranty, are still available.

The company’s mid-size sedan Ciaz, which was earlier sold at a total cash discount of Rs 45,000 is now being offered at a discount of around Rs 30,000. Discounts on other models like S-Cross and Ignis have also been reduced by anywhere between 15% and 30%. “The discounts will be further lowered after Diwali as the company has already cut prices by Rs 5,000 to give the benefit of the corporate tax cuts,” one of the persons said.

Dealers FE spoke to said the company has told them not to commit more discounts in the coming months as it has no plans to increase them.

Apart from monitoring offers very closely, the company has asked dealers not to give discounts from their own pockets as that raises expectations and consumers tend to postpone purchases. “The discount norms have been tightened and a fine is levied if a dealer is found giving more discounts than those approved by the company,” one of the dealers said. Maruti Suzuki did not reply to emails sent for this story.

The move is strategic because the BS-IV stock of the company, on which the discounts were higher, has almost been exhausted, following aggressive production cuts in the past eight months and the early launch of BS-VI variants of most of its models. Following a prolonged slowdown in car sales since July 2018, the company has been cutting production since February to align demand with supply. As the company started launching the BS-VI variants in advance, the production of BS-IV models was gradually reduced. Since discounts on BS-IV models was higher, most customers have been preferring them and as a result inventory of BS-IV models got exhausted.

Maruti Suzuki was the first company to roll out BS-VI models since in April 2019, much ahead of the deadline of April 2020, when implementation of BS-VI emission norms become compulsory. Around 70% vehicles in its fleet are currently BS-VI compliant and the company has already sold over 2 lakh such vehicles.

Even as Maruti’s domestic wholesales fell 26.7% in September, the 11th consecutive month of decline, dealers said retail demand has been better in the festive season. However, the stock are still slightly above normal. Maruti’s first product to get the BS-VI compliant engine was the Baleno, followed by Alto. The company’s two new products – XL 6 and S-Presso – have also been launched with the upgraded engine.

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