New Delhi, A virtual price war has broken out in the domestic car market.
To beat Hyundai’s price cuts on its Santro Xing models, Maruti is resorting to discounts and freebies such as free stereos and insurance.
Maruti sources said, “We are giving discounts in the range of Rs 20,000-35,000 in freebies and financing for the Zen and the Wagon-R cars, the two Maruti models which compete with Santro.”
The base models of Wagon-R and Zen sell for Rs 3.37 lakh and Rs 3.43 lakh respectively. The discounts make them competitive to Santro Xing’s latest prices, which range between Rs 2.78 lakh and Rs 3.45 lakh.
Dealers claim that General Motors is also offering discounts of Rs 20,000 and Rs 35,000-40,000 on its Optra and Corsa cars, respectively. Maruti dealers have also responded with discounts for the Esteem models.
According to Maruti officials, most automobile companies prefer to give discounts and freebies to an across-the-board price cut because discounts can be rolled back whenever the demand goes up, and introduced whenever there is pressure from competition. But a price cut is difficult to roll back.
P. Balendran, vice-president, General Motors India Ltd, said though an open price war is unlikely in the near future at the manufacturers’ level, discount offers from dealers could be used for competitive pricing.
However, Hyundai termed its recent price cuts as a “price rationalisation” to beat Maruti’s Swift.
“What we did was a rationalisation of prices that we found unbalanced in small towns. For example, the difference between the label price offered by the company and the dealer price was wide and customers, particularly in smaller towns, felt the pinch. By rationalising prices, we have sought to bridge the difference between the labelled price and the dealer margin,” said B. V. R Subbu, chairman of Hyundai Motors India.
He also ruled out any price war in any of the segments but hinted at possible new discount schemes that could emerge in the next few months.
Automobile market analyst Murad Ali Baig said, “The Swift has sent price tremors to cars that are cheaper and costlier than it.”
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