Discounts to stay as market slump continues: Maruti

With the automobile market reeling under a slump, Maruti Suzuki India expects to continue offering discounts to boost its sales.

"We offered a discount of Rs 17,500 on an average across models in the fourth quarter (ended March 31).

“Discounts are going to remain unless the market condition improves," Maruti Suzuki India Chief Financial Officer Ajay Seth said on a conference call.

The market has not picked up even after excise duty on small cars was reduced to 8 per cent from 12 per cent earlier.

For mid-sized cars, the levy has come down to 20 per cent from 24 per cent, while large cars attract duty of 24 per cent compared with 27 per cent earlier.

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"We are getting inquiries.

“However, the inquiries are not getting converted into sales. Our hope is that when economy recovers these inquiries should get converted into sales," Seth said.

The excise duty cut, announced in the interim budget in February, backfired because the company had to compensate dealers to the extent of Rs 143 crore (Rs 1.43 billion) in the January-March quarter.

In February, Maruti cut vehicle prices by between Rs 8,502 and Rs 30,984 across models after the excise duty reduction was announced.

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Asked if Maruti would follow Honda Cars India and Mahindra in increasing prices this month, Seth said: "Where is the question of increasing the prices in this weak market?

Unless market sentiment changes, we don't have any plan for a price increase."

The company scrapped a proposed price increase from January as the market remains weak despite steps taken by the government, including the excise duty cut.

Annual car sales in India declined for the first time in 11 years in 2013, posting a 9.59 per cent dip.

Maruti plans to boost sales by expanding in overseas markets and focussing on domestic rural customers.

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"We are looking to enhance our presence in various markets, including Africa, Latin America and West Asia," Seth said.

In the domestic rural markets, he said the company covers over 90,000 villages and there is scope to widen the segment.

"We are looking at expanding it. . . our marketing team says there are 600,000 villages in the country. . . so we can do better," Seth said.

He added that Maruti plans to spend about Rs 4,000 crore (Rs 40 billion) in this financial year on the introduction of new models, marketing and research and development.

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