[TusharK]

According to a media report, Maruti Suzuki has come under the scanner of the Competition Commission of India (CCI) for anti-competitive practices by controlling dealer discounts.



The CCI has alleged that by limiting discounts Maruti Suzuki is stifling competition among its dealers. It is said that if dealers had been given a free hand, customers would have benefited from lower prices.

Reports suggest that Maruti Suzuki is not the only company that has been controlling dealer discounts. A similar case against Hyundai is currently pending in the Supreme Court of India. Carmakers adopt the strategy of limiting dealer discounts to avoid a price war between its dealers. It also safeguards the interest of smaller dealers.

The CCI had also cracked down on carmakers for manipulating prices of spare parts.

Source: Times Now

Link to Team-BHP News

[paragsachania]

This had to come. I have read emails from the higher-ups from Maruti on how they have fined a dealer for offering discounts higher than another dealer from the same city.

One of the very reputed dealer offered a discount of 10K on a particular model for which the prospective buyer had enquired about at another dealership as well. When this other dealership asked for an official quote from the buyer, he promptly shared the same to this dealer. It was a matter of time that this dealership took this up with MSIL as a malpractice and the dealership that had offered more discount was fined 10L INR!!

It is due to this policy, I have never referred any colleagues or friends to a particular dealership knowing that the overall discounts would always remain same except that one of them may offer additional accessories.

In the end, this had to be a game of fair salesmanship that included customer interaction, ease of dealing with the dealership with TDs and choices & smooth delivery process. I somehow supported this operating model.

Now, if MSIL gives free hands to its dealers, it will end the basic ethics in salesmanship and will give rise to a variety of means of discounts to sell cars. Bigger dealers with better sales figures will take bigger steps while smallers ones will play it safe and may lose prospective buyers.

[vinair]

Don't get it. As a manufacturer, shouldn't I be having control on what sort of discounts can the dealers get and how it should be positioned in order to have no disparity and giving incentives and benefits (again in the form of discounts) to enhance partner performance? How sure are we that giving a free hand will ensure end customers getting benefited?

[Superleggera]

Very true.
had been to a Maruti Showroom in Bangalore for buying a swift for my friend, the dealer offered 10K discount , but the deal was in such a way that we should give the asking price as per the invoice and he will give us 10K in cash in hand.

[jetsetgo08]

Fair enough. I stand with CCI as the customer would be at benefit.

As per the usual observation the company discounts and exchange bonus on a particular model do not vary across dealers, at least in bigger cities. But, I guess it is legal for a dealer to offer any discount over the invoiced price be it in terms of cash or accessories as the dealer would be bearing the price and not the company.

[procrastinator]

I could be the one talking otherwise but I find standard prices/offers/discounts dealers mean fair dealing for customers and dealers.

The sales rep work hard in the last days of the month to sale the stock. Customers might get lucrative deals which couldn’t be fulfilled at the time of delivery. This would raise disputes and bitter experience.

Standardising prices/offers mean dealer would have to offer better sales experience and customer would be assured to have paid fair price.

I have observed dealers walk extra mile where they can cut their margins. Discounts on accessories or insurance or better exchange price of car.
At the end of day, these things are upto customers to get the job done at dealership or outside.

[paragsachania]

Originally Posted by procrastinator

I could be the one talking otherwise but I find standard prices/offers/discounts dealers mean fair dealing for customers and dealers.

Exactly what I say too. Earlier customer service and dealership experience would differentiate the dealers but now who offers best discounts will.

The Sales Rep. would not put much efforts but just talk to his boss and offer higher discounts and seal the deal. This is the same thing that happens when you go shopping for electronic equipment at popular shops.

Even now with standards in place the bigger dealers often promise early delivery due to higher sales numbers (fat inventory) they manage each month and higher number of cancellations that make way for early delivery to the customers.

[CliffHanger]

This is more like CCI preparing for Annual Appraisals and adding Pulling in Maruti to Achievements List.

CCI can do much better by pulling up all the manufacturers who have steadily hiked up all the car prices in the past several years without offering any value and forming a cartel.

[GTO]

Am sitting on the fence here. On the one hand, I agree with Maruti that there should be a restriction on discounts, otherwise it becomes a race to the bottom for car dealers and many of them will shut down. On the other hand, I see the CCI's POV too.

It's not just Maruti though. Every brand more or less tells the dealers how much is the maximum discount they can give. The only difference is that Maruti is very STRICT about it and monitors the same diligently through mystery shoppers. From Blackwasp's outstanding thread (Behind the Scenes: A salesman's life in a car dealership):

Originally Posted by blackwasp

The company also conducts surprise checks / visits on the many dealerships sending people posing as customers and making a note of all the happenings. These are known as mystery shoppers and everyone is scared of them as the repercussions of getting their attention are severe. These mystery shoppers could be a single person, or a friendly couple to a full-fledged family with kids in tow. A monthly review report is sent to the dealers - the only time when you make out if you had been visited by a mystery shopper or not. These are especially critical when a new model is launched or a car has a long waiting period (e.g. Brezza, Dzire, etc.).

Originally Posted by blackwasp

A lady with a kid came late evening (6:30 pm or so) just as I was about to leave. I don't know why, but I decided to attend to them as the other sales guys were busy. Greeted her, showed her the cars as per her requirement and even got her car valuated. After some time, we went for a Test drive. She said she'd call me at her office at noon the next day for further discussion. I went home after the usual long day. Next morning, in the morning meeting, our manager called us up and said that we had been visited by a mystery shopper. The email he showed us from the Regional Office had my visiting card attached. They had sent in a report with parameters and a remark against them, some of them were - availability of doorman, valet and receptionist, greeting by sales person, test drive, evaluation, pricing and schemes, refreshments offered etc. Thankfully I didn't get any negative points but 2 things that were highlighted included the pantry staff (who bring tea / coffee) not wearing gloves and there was no music playing inside the showroom! The reason for music was due to the computer that played songs being turned off at 6 pm. The missing gloves issue was asked to be rectified. Such small attention to detail was totally unexpected.

[tarik.arora]

I think that a manufacturer should have total control over the max discounts that its dealers can offer. If dealers are given a free hand, the ones with deep pockets will kill the smaller ones.

I know, some of us might think that the customer would not benefit from this but this makes the deal a lot more transparent. Imagine your friend paying 20k less for the same model and variant than you just because his dealer has huge money to drain and capture the market. Not just competition but fair competition should exist.

Also, if the "deal" is kept out of the equation, it will improve overall experience for the customers. The dealers will have no choice but to provide better sales experience, service experience, and transparency as a differentiation factor.

[2000rpm]

Originally Posted by tarik.arora

I think that a manufacturer should have total control over the max discounts that its dealers can offer. If dealers are given a free hand, the ones with deep pockets will kill the smaller ones.

Rightly said, the way a lot of manufacturers manage this by allocating territories. If anyone wants to buy from a particular dealer, he needs to have documents for registering the documents in the territory of that dealer.

This is not followed in crowded markets like metros, because having just one dealer cover such a large market is very risky.

[anshumandun]

I am aware of a similar practice in the consumer good's market where the manufacturer tries really hard to stop retailers giving too much discount on their products. The reason for this is the risk of dilution of "premium brand" image.

Pricing is a very important aspect for building a premium brand. A higher price gives an illusion of a superior product and a cheaper product is generally perceived to be cheaper in terms of quality too. This is probably one of the reasons that Maruti does not want too much discount on their products since they are trying hard to uplift their image to a premium manufacturer (Introducing Nexa was one successful way to do this).

Another advantage is for people like me who hate negotiating because we are not good at it. If I know that I will get the same price irrespective of which dealer I go to, that would make my purchase much more peaceful and satisfying.

[SPARKled]

So what if a bigger dealer kills of a smaller dealer. That's happening all over the world. Amazon has killed the brick and mortar stores wherever they are successful and I dont see the end user suffering due to this. Why should there be any protectionism in businesses ? You survive if you are good enough and dont if you aren't, Its as simple as that. See what protectionism has done to our PSUs and erstwhile premier and hindustan motors. In the long term such protectioinst strategies are more often harmful than not. In my opinion the watch dog is correct in pulling up Maruti and such control practices should be stopped.

[bhargavd]

Originally Posted by SPARKled

So what if a bigger dealer kills of a smaller dealer. That's happening all over the world.

Slowly the bigger dealer will kill everyone in the said geography and become a monopoly. Then, neither will he give an iota of discount nor good customer service. He will become too big for the OEM to manage as he has cornered a large piece of the business.

Thats the reason why OEMs keep tabs on discounts. CCI though right in the approach for "free markets" isn't looking at the effects in long term.

[fordday]

Originally Posted by bhargavd

Slowly the bigger dealer will kill everyone in the said geography and become a monopoly. Then, neither will he give an iota of discount nor good customer service.

Exactly what we are going to see in the mobile phone service provider arena.
That big guy will wipe out all others soon and we will have no other options but go to him.