Discounts, auto cos strategy to tide over low volume

Last Updated: Tue, Jun 21, 2011 04:23 hrs

At a time when rising interest rates and soaring petrol prices are slowing automobile sales, companies are increasing marketing spends and doling out various discount offers to lure back customers.

Sales growth of passenger cars had slowed to seven per cent last month, the lowest recorded in over 20 months, compelling car manufacturers to reconsider their marketing strategies.

In Focus: The 15 most profitable movies of all time

While the country’s largest car maker, Maruti Suzuki India Limited (MSIL), has increased its marketing budget by a fifth over the last two months, others like General Motors, Honda Siel Cars India, Hyundai Motor India and Volkswagen are offering incentives to rev up lagging sales.

“As the market leader, we have undertaken a lot of below-the-line activities to kick-start sales. We are accessorising cars to generate sales at the showroom level,” MSIL Chief General Manger (marketing) Shashank Srivastava, said.

“The fuel price hike has been a major deterrent to sales in the last two months. We have organised mileage rallies for Alto, Estilo and WagonR to highlight their fuel efficiency. Besides, special financing schemes across models are being offered at our dealerships to increase sales.”

In Images: Toyota launches new variants of Corolla Altis

Industry sources indicate that with a rise in interest rates affecting the market sentiment, the conversion rate at showrooms has fallen to 15-16 per cent from the usual 20 per cent. MSIL is running four campaigns, each costing Rs 4-5 crore, to draw in buyers. “Besides the ‘Alto India Let’s Go’ and ‘WagonR Number 1 Car Sales’ campaigns, we are doing a campaign on television for the SX4 and Estilo. Another campaign is on air to highlight our low cost of ownership of Maruti cars,” added Srivastava.

The company is also offering discounts in the range of Rs 15,000-26,000 on many its cars.

Similar is the story at GM India. “Despite rising input costs hitting our bottom line, we have decided to continue with incentive schemes to generate volumes,” said Director and Vice-President (corporate affairs) P Balendran.

The company is offering cash benefits ranging from Rs 43,700 to Rs 51,200 on small car Spark, and free insurance and accessories worth Rs 21,000 with hatchback Beat. Discounts on the Aveo range vary from Rs 10,000 to Rs 25,000, while for some variants of multi-utility vehicle Tavera, the cash benefit can go up to Rs 1.44 lakh.

100 years of 'Think'

Japanese auto major Honda Siel, in the meantime, has slashed prices of its flagship sedan City by up to Rs 66,000 to keep off competition and boost sales. After petrol prices were increased by Rs 5 a litre last month, the sale of diesel variants have been rising. Honda City is the only car in the mid-size sedan segment (which has strong contenders like Hyundai Verna, Maruti Suzuki SX4 and Volkswagen Vento) that does not have a diesel option.

MSIL Managing Executive Officer (marketing and sales) Mayank Pareek informed, “Nearly 65 per cent of sales use to filter in from the diesel variant for cars in which we have the fuel option earlier. However, after the latest hike in petrol prices, the proportion of sales coming from the diesel variant has increased to 80-85 per cent.” MSIL sells diesel variants of hatchbacks Ritz, Swift and sedans DZire and SX4.

Industry experts said the sudden spurt in the sale of diesel vehicles had led to inventory of the petrol variants of cars piling up. Hyundai is now offering a fixed monetary package to the buyers of petrol variants of Santro and i10 to cushion the rise in the price of the fuel. Volkswagen, which has announced an increase of 2.2 per cent in the price of Vento due to rising commodity costs, has limited the hike only to the diesel variant.

Neeraj Garg, member of board and director (passenger cars), Volkswagen India, said: “We are aware that customers who prefer petrol variants are already faced with the burden of increased fuel costs and, therefore, we decided to continue to absorb the additional costs for our petrol variants.”

The company is further offering promotional interest rates of 6.99 per cent on the petrol variant of Vento till June 30.

Another Japanese major, Toyota, is increasing direct marketing activities to boost sales. Sandeep Singh, deputy managing director (marketing and sales), Toyota Kirloskar Motor, said: “The sharp increase in petrol prices coupled with interest rate hikes has affected market sentiment. The number of enquiries and conversion to sales has come down over the last two months in the industry. We have not been affected as much due to new launches. We have asked our dealers to reach out to our customers and constantly communicate with them, inform them about the lessened waiting period for our cars to increase sales.”

More from Sify: