Carmakers try to lure customers with discounts

Carmakers are trying to lure customers with substantial discounts and are also throwing in freebies on most vehicles after sales growth fell to 1.6 per cent in June.

Honda set the pace discounting a whopping Rs1.7 lakh as a limited period offer on its struggling hatchback Honda Jazz on Monday, while market leader Maruti Suzuki is offering rebates over Rs50,000 on Alto, WagonR and Estilo that together make up half its sales.

Maruti's chief general manager (marketing), Shashank Srivastava said the company was only reacting to the market. He added that retail sales had taken a hit due to a huge slump in customer's responses. He said to maintain the sales tempo, Maruti had maximised the benefits on high selling models like Alto and WagonR in July as overall sales had turned negative in June.

After a breakneck 30 per cent growth last fiscal on the back of a 26 per cent gain in 2009-10, the Indian car market started slowing down in April even as loan rates rose and fuel prices surged. Car sales hit a 26-month low in June.

A discount war now seems to be the order of the day. Carmakers are taking cues from the international trend of charging lower interest rates on auto loans as part of the discount.

Interest rates have increased by up to 300 basis points in one year due to the central bank's policy rate hikes to control inflation.