Will huge discounts on passenger cars boost sales in Dec?

Moneycontrol Bureau

Its been raining discounts on passenger cars, especially those running on petrol, this December. Most car makers offer discounts every year in December to clear out old stock. But this time the discounts are huge, as much as Rs 60,000 plus other benefits like free insurance etc, as car makers look to end what has been a disappointing year on a little high.

Passenger car sales have seen a sharp decline this year, amid rise in petrol prices and several rounds of interest rate hikes, which has made loans expensive. So companies are making every effort to tempt customers to buy.

Demand for petrol cars has slumped this year as a sharp rise in price of the fuel, made many opt for diesel cars instead. So even as there is strong demand for cars like Maruti Suzuki's Swift diesel, its volume drivers, which include A-Star, Estilo, Wagon R, Alto and petrol models of Ritz and Swift have had few takers. Maruti's mini car sales fell 17.4% over April-November, while compact car sales are down 24.3%.

No wonder then that the India's largest passenger car maker is offering steep discounts. Discounts range from Rs 15,000 to as much as Rs 56,000, depending on the model. It is also offering freebies like LCD TVs, accessories vouchers and petrol vouchers among other things on cars booked this month.

Other car makers like General Motors too are offering discounts on models like Aveo and Aveo Uva. Hyundai is offering rebates up to Rs 50,000 on Santro and i10. Ford too is not behind in the discounts race. Its promotion promises savings of up to Rs 15,000 on Figo and as much as 75,000 on the new Fiesta.

"Due to the sluggish sales this year, dealers are sitting on lot of inventory, which they are looking to clear. So there are more discounts this year," says Ronak Sarda, auto analyst at MSFL Institutional Research.

Also, many car makers have announced price hikes from January, apart from new models, refreshed variants for the new year, and so would want to phase out 2011 models, Sarda told moneycontrol.com

But analysts say it is unlikely that the steep discounts will lead to a jump in sales.

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