India’s largest carmaker, Maruti Suzuki India Ltd., has cut prices of some of its cars, a week after the government reduced corporate tax rates to spur growth in the Indian economy.
The measure, Maruti Suzuki said in an exchange filing Wednesday, is aimed at passing benefits of the corporate tax cut to customers, amid the auto slowdown. Sales of cars and utility vehicles dropped to a 22-year low in August, according to data from Society of Indian Automobile Manufacturers.
The company would reduce prices (ex-showroom price) by nearly Rs 5,000 on select models, including variants of Alto 800, Alto K10, Swift Diesel, Celerio, Baleno Diesel, Ignis, Dzire Diesel, Tour S diesel, Vitara Brezza and S-Cross.
The car price cut, according to the filing, will be applicable on an immediate basis and will be over and above the current promotional offers that the company is giving.
Maruti Suzuki said it’s optimistic the price cut will reduce cost of acquisition, especially for entry-level customers. The company also hopes that the announcement, made with the Dussehra and Deepawali festive season round the corner, will help boost customer sentiment and revive the market.
Brokerages expect the government’s corporate tax cut to reduce Maruti Suzuki’s effective tax rate. While Emkay Global pegs it at 25.2 percent from the 28 percent earlier projected for 2019-20, ICICI Direct Research revised the firm’s FY20 profit estimate upward by 2.6 percent.
Maruti Suzuki’s discounts inched higher in August and discounts as a percentage to average selling price was the highest in eight months, Axis Capital’s Auto Analyst Nikhil Kale wrote in a recent note.
Higher discounts were offered on variants like Celerio, Swift, Dzire and Baleno, he said, adding the company’s discount as a percentage of selling price rose to 3.2 percent in August from 2.7 percent in January.
