Maruti Suzuki defends offering discounts after Nomura calls it a 'sign of weakness'

India’s largest carmaker Maruti Suzuki is offering discounts on its Arena lineup — Wagon R, Swift, Celerio, Dzire and the new-generation Alto K10 — for December with savings of up to Rs 52,000. Brokerage firm Nomura sees the rising discount on small cars as a sign of weak demand for such models. In a comment about Maruti specifically, it has said the blended impact of discounts will still be lower compared to the past.

However, while speaking to CNBC-TV18, Maruti Suzuki’s marketing and sales head, Shashank Srivastava, disagreed with the analysis.

Srivastava said that if supply is more than demand, there will still be more discounts. The remarks come after Maruti Suzuki announced discounts and other schemes like exchange benefits, cash discounts and corporate offers on Maruti Arena models. The new Brezza SUV and the Ertiga MPV, however, are not discounted.

Alto, WagorR, Tiago, and Grand i-20 offering higher discounts in December 2022

Discounts rely on the demand for a product and the supply available to the OEM (original equipment manufacturer) in form of components and raw materials. However, the Nomura report says that December discounts are higher as OEMs are tending to clear year-end inventories.

Maruti admits that though chip shortage has been resolved by 95-96 percent, the remaining 4-5 percent still matters a lot and for that, there is very little visibility going forward.

"As a result, it's difficult to predict exactly when the semiconductor issue will go away. Clearly, it is still there, especially in some models... chips are not just semiconductor components, they are not generic in nature, and they are also model specific. So we have found that in some models, we have seen smaller production, and hence no discount, and also long waiting periods,” said Srivastava.

However, things have started to brighten up a bit. Srivastava says that discounting has been higher this month (November) as compared to the previous two quarters.

Referring to his demand explanation he added that if the supply is larger than the demand, there will be a discount even if the volumes are large.

“To say that the smaller cars have larger discounts and therefore there is no demand is not correct. In fact, in the April-November period of the current financial year, the top five vehicles in the industry are all small cars,” he explained.

While Maruti is looking to increase its presence in the sports utility vehicle (SUV) market, Nomura prefers Mahindra and Mahindra given its strong SUV model cycle and a healthy order book.

"The RDE (Real Driving Emissions) norms will increase the cost of compliance for the auto industry. For petrol vehicles, it will be much lower than for diesel vehicles," said Srivastava.