Automakers Slash Prices; Hope to Stimulate Car Sales

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Dec. 9 – Hit by a potent mix of liquidity crunch, high borrowing costs and a slowing economy India's auto makers on Monday slashed prices by up to 4 percent. The car companies were reacting to the 4 percent cut in excise duties offered to manufacturers as part of the Central governments stimulus package. A rough industry estimate says Indian auto companies are likely to take a hit of Rs 1,000 crore (US$200 million) on unsold cars, trucks, buses and two-wheelers as they pass on the benefit to consumers, hoping to spur demand by lowering costs.

After five-years of uninterrupted growth, total sales of passenger vehicles (including SUVs and multi-purpose vehicles) dropped drastically in October. The industry's decline of 6.59 percent to 98,900 vehicles in October (compared with 105,000 vehicles last year) was the largest drop in sales in eight years. Top car makers Maruti Suzuki India, Hyundai Motor India (HMI), Tata Motors, Honda Siel Cars India, General Motors, Ford Motor India and Mahindra & Mahindra (M&M) are already experiencing a drop in sales and don't expect the situation to get any better especially since footfall in showrooms has dropped by 50-70 percent in November.

“It is the worst month of the fiscal in terms of sales. Retail sales have hit rock bottom, despite high discounts. We have tried every trick to get footfalls, even at the cost of our profits, but the market is not reviving. November is the start of the real-time meltdown in passenger car sales,” a senior executive of car market leader Maruti told the Economic Times.