[GTO]

Related Thread (Growth levels slowing : Indian car sales witness the worst festive season in 5 years)

Because of reasons listed in the thread above, car sales have been slowing down. What better way to push out inventory than discounts then? Here are some official stats. And if the dominant carmaker has seen its discounts climb up, you can bet that every other manufacturer has too. Bhargava isn't pleased:

The company offered a record average discount of Rs 24,300 per vehicle in order to clear the unsold inventory after a lacklustre festive season. This discount was high, compared to Rs 18,800 in the second quarter and the average of Rs 19,400 for the April-December period of 2018-19.

The Q3 discount is higher by 36 per cent, compared to the corresponding period of 2017-18. The high discounts helped dealers bring down vehicle inventory to a reasonable level, but toned down the margins.

The double-digit decline in profit pulled down the company’s stock by over 7 per cent on Friday and eroded its market cap by Rs 15,740 crore in a single day. The stock price of the country’s most valuable automobile firm hit a 21-month low of Rs 6,420 at the BSE on the same day. Analysts tracking the company raised margin concerns after the results were announced.

Source

[vigneshkumar31]

Will the impending BS6 kick in also make buyers hold back till the dust settles after 2020?

Then ,could 2019 see some shocker discounts to push out BS4 inventory.?

[The Rationalist]

This doesn't sound good for the economy as a whole. Looks like there is a serious financial slowing down about to happen. But I do wish that India doesn't go into high car ownership like developed world , rather bypass that and go into public transport or shared mobility. I'm planning to find work at a place which would help me use public transport for daily commute. It's not worth suffering the stress during peak hour driving.

Regarding BS VI, very few of my friends know about it , so apart from a minority nobody is bothered about postponing car purchase to get a BS VI compliant one. If sales have come down already, imagine what would happen once BS VI kicks in. Expect free fall for auto stocks soon.

[theredliner]

Happy to hear about this. The prices have been going up, up and up for every silly reason and never down for that same silly reason. Most cars these days hardly offer value and hopefully this will prompt manufacturers to take a serious look at their ridiculous prices. Again, 25k average discount is hardly anything when compared to the discounts that dealers offer in countries like US where cars are priced much lower. I know taxes are horrible in our country, but that isn't the only reason for the high prices. Also, I hope this move prompts the govt. to stop milking the auto industry.

[Chetan_Rao]

There are surely a bunch of factors involved with slowing growth and demand, but we're long overdue a price correction in most segments. Right from a top-end Swift costing ~10L, a Creta close to breaching the 20L mark, a City doing the same and an Innova getting close to 30L, prices have gotten crazy. I won't even bother about the entry & mid-level luxury segments.

'A product is worth whatever a customer is willing to pay for it' is a two-way argument, and it's the manufacturer's turn to swallow the bitter pill and part with their margins to move inventory.

[srishiva]

Maruti is worried about unsold inventory. How do they have unsold inventory ? No better prediction for the demand ?

Maybe people dont want to buy their cars (not just Maruti) at the current prices.

[AutoNoob]

Originally Posted by vigneshkumar31

Then ,could 2019 see some shocker discounts to push out BS4 inventory.?

Looking at the fate of unsold BS-III vehicles at the end of March 2017 and no respite in legal forums, the auto manufacturers must have learnt their lessons. So, they'll start tapering off BS-IV vehicles much earlier this time. So, in my opinion, there won't be too many vehicles left till end of March 2020.

[amit1agrawal]

Originally Posted by theredliner

Happy to hear about this. The prices have been going up, up and up for every silly reason and never down for that same silly reason. Most cars these days hardly offer value and hopefully this will prompt manufacturers to take a serious look at their ridiculous prices. Again, 25k average discount is hardly anything when compared to the discounts that dealers offer in countries like US where cars are priced much lower. I know taxes are horrible in our country, but that isn't the only reason for the high prices. Also, I hope this move prompts the govt. to stop milking the auto industry.

I am also happy to hear this. In some cases, the prices have gone up 30-40% in the last 5 years. In general, the prices have been going up only. For example, 5 years back ~11L would get you a decent C2 segment sedan. Not anymore. One needs to shell out 14-15L for the same. 11L now would fetch you only a C1 sedan only and in some case top-end model of the hatchback for example i20!
I for one think that spending 14-15L for C2 sedan is not worth. It's better to go for that 20L XUV/Harrier/Hexa (VFM wise).

[2cents]

Originally Posted by vigneshkumar31

Will the impending BS6 kick in also make buyers hold back till the dust settles after 2020?

Then ,could 2019 see some shocker discounts to push out BS4 inventory.?

Actually, I was of the impression it would work the other way. Most owners are anyway least bothered about the level of pollution from their vehicles. BS6 means this is their last chance to own a frugal Diesel vehicle before they become expensive. Did I get it wrong?!

[desiaztec]

Originally Posted by Chetan_Rao

'A product is worth whatever a customer is willing to pay for it' is a two-way argument, and it's the manufacturer's turn to swallow the bitter pill and part with their margins to move inventory.

I echo your thought and that is why I wonder as to why don't we have a fair price for commodities (Read: cars). Why is it that a Duster launched years back was expensive and is cheaper to buy now, and in the same breath why a Scorpio which was (relatively) cheaper to buy during that same period when Duster was launched has become expensive now?

When price hikes are around the corner, the manufacturers justify saying increase in inputs like Labor cost and raw material cost. All manufacturers face these issues, so why then a Captur is available for a Lakh rupee discount? Few might say its all about demand and supply, but then I think OEMs don't charge a fair price for these cars and fleece the customers as their cars are in demand, case in point Baleno, Innova, Creta, and the Fortuner.

Being a manufacturer of machined goods, I too keep a capitalist view in my mind and I never think of fleecing my customers.

[NiInJa]

Interesting times we are living in, there is a slowdown in market but at the same time some cars are selling well: Marazzo and the new Ertiga. I think there is something different happening at the fundamental level. Car prices, especially the sub-4 meter
hatchback onwards (Swift, Baleno, i20 etc and so on) have become a little too expensive for the middle class' comfort. The Swift Diesel top end is just about 1 million on road, which simply doesn't make any sense. The petrol top end too is around 8 lakh rupees, so people in metros will probably prefer app based cars over owning one.

For those who can buy, its perhaps the best time to get one now, for example the BR-V is having massive discounts upto 1.2L and its a nice car, so is the Duster. Even the best selling Vitara Brezza had discounts of about 25000 INR till first week of January, the first time since it was launched. I think these discounts will be gone soon, once the market (manufacturer as well as buyer) adjusts to changing dynamics.

[SmartCat]

Originally Posted by desiaztec

I echo your thought and that is why I wonder as to why don't we have a fair price for commodities (Read: cars). Why is it that a Duster launched years back was expensive and is cheaper to buy now, and in the same breath why a Scorpio which was (relatively) cheaper to buy during that same period when Duster was launched has become expensive now?

A manufacturer will start offering discounts if inventories start piling up at the dealership level and at the factory stockyard. It's not just about parking space - it costs money to hold inventory because capital is locked up.

In such circumstances, it makes sense for the manufacturer to clear up the inventory by offering discounts for a short period of time. If the manufacturer realizes that fall in demand for a particular model is permanent, he might decide to permanently cut down production too.

With the respect to Duster and Scorpio, it simply means Duster's demand has diminished gradually and hence Renault needs to clear piled up inventory. But Scorpio sales have been more or less steady and hence Mahindra does not have the inventory problem.

[vigneshkumar31]

Originally Posted by 2cents

Actually, I was of the impression it would work the other way. Most owners are anyway least bothered about the level of pollution from their vehicles. BS6 means this is their last chance to own a frugal Diesel vehicle before they become expensive. Did I get it wrong?!

I think the uncertainty involved with the future spate of bs4 diesels with regard to RE-registration ,resale etc may be reasons for prospects to hold on the purchase till clock strikes VI.

[ACM]

Happens in all industries.

1) Iphone and Samsung price drops in recent times. Especially Iphone which didn't do it till recently and have always charged more for less.

2) Gionee F250 MRP 10k odd now for 5.5K in less than 9 months.

Poor sales, stock buildup like in any industry.

Yep Duster, Creta, Scorpio, ALL Toyota models exhibit this kind of unjust pricing now or did so earlier. Even the XUV 500 for that matter.

I bought the Safari EX for about 8.5-9L on road in 2001. It isn't just price inflation that takes it to 17 plus today.

That said a general correction will be both good and bad. While car prices may become better for those who can afford it. The Job market will crash and unemployment will rise.

There is no win-win solution.

[RickyC]

The recent over-discounting pattern has not come without some deep rooted reasons...
With the general air of negative sentiments around the auto sector, what with diesel bans, limiting the life of cars, over crowded city roads, parking issues, along with high fuel prices, high interest rates and of course the ever increasing fleets of Ola/Uber is not helping the cause in any which way.
This negativity is not going to go in a hurry and is here to stay. While we do talk of low penetration of cars in our county, the cities which lap up the chunk of cars are showing withdrawal symptoms and we all, including the analysts who have predicted high growth numbers in a country like India may be in for a surprise.