Cars Get Cheaper

The cost of buying that car just got a whole lot cheaper. Carmakers across India struggling with sluggish sales have decided to cut prices of various models. It’s something that’s been a collective industry decision as every major auto maker has already done it or has promised to do it in the coming days. The intent for such a move is certainly to add life to a struggling auto industry worldwide that has also impacted Indian companies which means that now could mark the beginning of a car buying season.

The decision to cut car prices from a viewpoint of the company is a hard one but a necessary one nonetheless. Much of it stems from a massive slump in demand for cars. Consumers have drastically cut down on their spending and as a result of which their savings have gone up to such an extent that even FMCG’s are feeling the effects of the consumer saving effect.

It’s perhaps been this reason that has led to the magnitude of the price cuts we have and will see with regard to various models.

Maruti Suzuki has cut prices across almost its entire range of small cars. The Maruti 800 model will now be almost five thousand rupees cheaper while the Maruti Suzuki Alto will cost fifteen thousand lesser. The final prices across Indian cities are decided on showroom and duty prices.

There’s also been a cut in the price of Maruti’s Wagon R model which will cost a huge 35,000 rupees less. It’s not Maruti alone that’s indulging in price cuts but a host of others including Tata Motors and Hyundai Motors.

The price cut is being seen as a stimulant to demand and if it works will be a boon to these companies. All of them have been building up huge stocks of different models. The cut should help as a stock clearance mechanism.

For the moment the price cut has been applied to the small car sector with only Ford and General Motors applying the same to some of their sedan luxury variants. This is expected to change when Indian companies too decide to cut prices on similar models thus making the entire range competitive.

The price cut has also been helped massively by the Indian government’s newly unveiled fiscal stimulus package. There are some provisions within it to help car companies. With the government also having cut excise duty rates, the way ahead will be for car makers to pass the benefit on to the customer by pricing their models cheaper.

Combined with the cut in fuel prices and the just announced cut in the RBI’s repo and reverse repo rates, the benefit of paying less for a car becomes even clearer as banks are soon expected to cut home loan and car loan rates as a result of which a prospective buyer will now pay lesser EMI’s.

The slew of price cuts will no doubt increase demand but to make sure that the same environment remains for some time will be a challenge.