Cos boost incentives for SUVs, minivans to stimulate demand

The SUV segment, too, saw similar incentive increases from Rs 32,296 to Rs 42,215 for the same period. Body styles such as the micro-car and mini-MPV segment maintained its incentive levels at Rs 38,997 and Rs 17,665, respectively. Hatchbacks and sedans saw a marginal rise for the quarter ended June 2023, according to Jato Dynamics data.

During the pandemic, supply was severely constrained, which allowed OEMs to raise prices and operate with negligible discounts. However, with a build-up of stocks in the pipeline, OEMs are now using incentives as a form of price discrimination to generate demand.

While PV sales have recorded the highest-ever volumes of almost a million cars for the April-June quarter, paradoxically, OEMs are also offering big sales promotion incentives on many models, said experts.

Incentives can be a combination of cash discounts, exchange or trade-ins and freebies like extended warranty, free insurance.

“This paradoxical situation has emerged from the demand-supply mismatch and the supply constraints in semiconductor components issues,” said Shashank Srivastava, senior ED at the country’s largest carmaker, Maruti Suzuki.”While there is growth in incentives on specific models and body styles, we’re also beginning to see an increase in average weighted incentive for both luxury and mass production models. The change in incentives happens at a time when the industry inventory is swelling to almost pre-pandemic levels according to some dealers,” said Ravi Bhatia, president, Jato Dynamics. Some models have huge pending bookings and long-waiting periods, and many other models that have better production, leads to higher inventory and hence discounts.

For Maruti Suzuki, we have almost 3,80,000 bookings in such models as Vitara, Jimny, Fronx, Brezza, XL6, Ertiga and Dzire. These models obviously see little or no discount. On the other hand, hatchbacks have better supply position hence good sales promotion incentive schemes. It is a function of demand-supply gap that determines discount levels, added Srivastava.

While overall industry inventory level of 2.6 lakh, which is about 25-27-day inventory is quite normal and similar to pre-Covid times, there are models where inventory has crossed the 45-day level. While dealers point to these high inventory levels, customers are feeling the brunt of low inventories of some models.

At Hyundai Motor India, SUVs form a key part of its product line-up and strategy. While the industry has witnessed a slew of new SUV launches over the past couple of years, Hyundai has a wide SUV portfolio, which includes Creta, Venue, Alcazar, Tucson, Ioniq 5, Kona Electric. “Visibly, our SUVs have been gaining strong momentum and the upcoming launch of Hyundai Exter, we’re confident that this positive momentum will not only sustain, said Tarun Garg, chief operating officer (COO), Hyundai Motor India.

Notwithstanding the record volumes in June, growth will be in low single digit, as the base of last year was high at 3.21 lakh. This may lead to a negative growth in July, said Srivastava.