Dream car maker
This means a benefit of Rs 2, 000 on a small hatchback to a few lakh rupees on luxury cars for buyers until the stocks last or the end of March, whichever is earlier. For auto makers, this offers an opportunity to clear inventory of 2-2.5 lakh vehicles lying in their stockyards and with dealers before the new fiscal year begins.
Manufacturers expect the offers to help drive up March retail sales growth to double digits, but they are unsure about the following months. These cars and utility vehicles were produced before the government announced the 1-4% infra cess on vehicles in the Budget unveiled on February 29, industry executives said. Vehicles costing more than Rs 10 lakh face an extra 1% luxury tax.
Most of the auto makers announced price hikes immediately after the Budget announcement.
The likes of Maruti Suzuki, Honda and Toyota have informed their dealers to extend the pre-Budget stock to customers at pre-Budget price, which will lead to a benefit of Rs 2, 000-80, 000 for buyers of these brands.
Veejay Nakra, senior vice president of sales and customer care at M&M, said though the 1-4% duty hikes were already effective, the company has decided to pass on the price increases only from April 1.
According to industry sources, of the inventory of pre-infra cess vehicles lying either at company stock yards or at dealerships, 30-40% have already exhausted in the first 10 days of this month and the off take is healthy.
Jnaneswar Sen, senior vice president of sales and marketing at Honda Cars India, said the company's dealers have a stock of pre-infra cess vehicles and that the offer is available for a short period.
At the luxury end of the market, Volvo Auto India has decided to increase vehicle prices by 3-5% starting April 1 and will be offering all its vehicles at pre-budget prices until then. After posting more than 25% growth in January and February, Volvo doesn't want the budget hike to impact the sales this month.
Volvo Auto India Managing Director Tom von Bonsdorff said customers can get a benefit of Rs 75, 000 to Rs 2.45 lakh in March across its portfolio.
"We have said we will increase prices by 3-5% as of 1st of April, so March should be a good sales month for us. We had strong demand in January and February and we expect it to continue in March, " said Bonsdorff.
India's passenger vehicle market has seen regular ups and downs in taxes in the past six to seven years and, usually, whichever direction the duties go, the benefits or tax is passed on immediately. But now, the market environment is different.
"It is not an easy market, the cost of acquiring customers is only rising. The companies are left with no choice but to use scenarios like these to draw customers into the showrooms, " said a senior executive at a leading car maker, requesting anonymity. "The offtake from showroom will be good in March, but following months are expected to remain tough."
Industry body Society of Indian Automobile Manufacturers Association has already cut the fiscal 2016 growth rate estimate on the passenger vehicle market, but is hopeful of a double-digit expansion in the new year starting April. But many industry players call it a very optimistic target and say the sales may only grow in a single digit.