As per commercial vehicles dealers discounts have surpassed more than 20 percent of the value of the vehicle which translates to as much as Rs 5 lakh per truck if bought in bulk.
Manufacturers of trucks and buses are shelling out steeper discounts as the battle for market share gain hots up. Tata Motors, Ashok Leyland, Eicher Motors and Mahindra & Mahindra have offered bigger discounts in the second quarter ended September 30, as compared to the first quarter.
As per commercial vehicle dealers discounts have surpassed more than 20 percent of the value of the vehicle which translates to as much as Rs 5 lakh per truck if bought in bulk. Usually, discounts are in the range of 12-15 percent per vehicle.
Girish Wagh, Head, Commercial Vehicles, Tata Motors, said, “The discounting has actually gone up by around 15-20 percent at an industry level and this is post the pricing increase. Now, as far as our position is concerned, I think, and this has come out of our study as well as from interactions with the customer, we are generally ending up paying less discount as compared to the competition”.
Tata Motors, which suffered a loss in market share of 14 percent in the last few years, is trying desperately to turn the tide. Sources say discounts on Tata trucks have hit a peak as its dealers are under pressure to meet sales targets.
Siddhartha Lal, Managing Director and Chief Executive Officer, Eicher Motors, said, "We have had a slight drop in market share in Q2 as we have grown slower than the industry. It was a question of protecting margins against market share gain. We let go of a few deals because they asked for very high discounts. That’s the reason why we have been able to raise our margins on trucks."
The average discounts per vehicle has shot up to Rs 2-5 lakh from Rs 1-2 lakh earlier, depending on the size of the contract. Bigger size of the deal will mean lower price per vehicle.
“There has been enormous increase in discounting levels. It’s close to its peak levels in the last many years and it is still going on. One expects that as industry grows discounting falls but that has not been the case," added Lal.
Chennai-based Ashok Leyland, India’s second biggest truck maker, is also forced to fork out higher discounts to gain volumes.
“When the biggest player is offering unbeatable discounts there is no option left for us. We are not matching the levels that they are offering but yes discounts are heading north for us too,” said a Ashok Leyland dealer.
The rise in discounting is coinciding with rise in volumes thereby indicating that incremental sales are a result of higher discounts and not of fundamental demand.
According to data shared by the Society of Indian Automobile Manufacturers (SIAM) sales of medium and heavy trucks (goods carriers) surged by 31 percent in the second quarter to 71,353 units as against 54,632 units sold in the same quarter last year.
In comparison, in the first quarter sales of same class of trucks slumped by 33 percent to 39,872 units as against 59,149 sold in the corresponding quarter last year.“Yes, as compared to the first quarter, the discounts have gone up to some extent in Q2. Of course, as you know, during Q1 the volumes were pretty low. In Q2, the bulk of the supply chain constraints have been removed and, therefore, we've come back to the earlier competitive situation. So the discounts have gone up a bit,” added Wagh.