Maruti Contemplates Price Protection for Small Car Buyers Amid Inflationary Pressures

Maruti Suzuki Considers Relief Measures for Small-Car Buyers Amid Price Hike

New Delhi: Maruti Suzuki India Ltd, the country's largest carmaker, is contemplating a request from its dealers to introduce measures to shield small-car buyers from price hikes as demand for the category continues to rise following last year's GST cut.

According to Partho Banerjee, senior executive officer of marketing and sales at Maruti Suzuki, the company is seriously considering providing relief to entry-level model buyers. "We are getting feedback from our channel partners that the customers who book these entry-level models should receive some relief from the price hike we announced. We are seriously contemplating this. The final details and till what date this relief can be allowed has not been finalized yet but we are discussing," Banerjee said.

To help small-car buyers, Maruti had rolled out a financing scheme in April with AU Small Finance Bank, covering four models: WagonR, Celerio, S-Presso, and Alto K10. Under the scheme, customers can deposit an amount equivalent to their monthly car loan instalment into a recurring deposit (RD) account. The proceeds can then be used as a down payment after three to six months for the purchase of a new car.

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Maruti has implemented a price hike of ₹30,000 from June across all its models due to West Asia war-linked inflation, which has led to a surge in prices of commodities like steel, aluminium, and platinum group metals, among others, which are used in cars. Other carmakers like Hyundai Motor India, Mahindra and Mahindra, and Tata Motors Passenger Vehicles had already announced price hikes earlier.

Maruti's Sales Surge

Maruti's efforts to sustain demand in small cars also come at a time when it has introduced a flex fuel model of its entry-level car, WagonR, in a bid to increase share of the clean fuel technology in its overall sales. With expectation of cheaper E85 flex fuel at fuel stations, the company noted on Thursday that the vehicle can be an efficient and cleaner option for consumers.

Since the commissioning of its new production line in Kharkhoda in April, sales of entry-level mini cars have surged by 147% to 32,341 units cumulatively in April and May. Passenger car sales, which include hatchback and sedans, surged by 42% during the same period to 400,366 units. The company's overall sales increased 33% in the same period to 400,366 units, as per its latest sales data released on 1 June.

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Industry Insights

A part of the reason for the company witnessing a robust boom in small car sales has also come from the fact that it did not take a price hike for its models till June, allowing the 10% GST benefit which was implemented last year to stay longer in the market even as pressure builds on for price hikes.

Tata Motors Passenger Vehicles has also recognized the segment's importance and potential for growth. "What is important to recognize is that customers did not move away from hatchbacks, because for millions of Indian families, this is still where their first four-wheeler mobility journey starts," said Shailesh Chandra, managing director and chief executive at Tata Motors PV.

On the financing scheme, Maruti Suzuki's Banerjee said customers will earn interest on the monthly amount they will deposit, which will be equivalent to monthly EMI instalments of the car they want to purchase. After three to six months, the consumer can take the amount collected in the account and make a down payment on the car loan, which they will use to purchase their selected cars.