Graph Beat | Maruti's price war against small cars. Will it work?

Copyright © HT Digital Streams Limit all rights reserved. Graph Beat | Will Maruti’s price war against small cars turn the tide? It cuts deeper than the GST drop. GST rate cuts: Maruti Suzuki has decided to pass on the full benefits of tax cuts to its customers. The passenger vehicles will see the price cut up to £ 1.29 lakh at the prices of the former performance. (File Photo: HT) Summary Maruti Suzuki has reduced prices above GST benefits on its entry-level cars, with the aim of stopping a five-year disc in the market share amid an SUV-led shift in the taste of the consumer. Maruti Suzuki India Ltd has announced that it will pass on the recent reduction in the Tax on Goods and Services (GST) to its customers from September 22. The company, India’s largest car manufacturer, has reduced prices in its entire vehicle setup. The most important price cuts are at entry-level models such as the Alto, S-Presso and Celerio, with more modest reduction for larger vehicles such as the Brezza, Grand Vitara and Invicto. “Based on our calculation, although lowering the average average prices due to GST should have been around 6.5%, the company took an average price reduction of about 7.5% due to much higher price cuts in the cars of the entry segment,” said analysts of Nomura Financial Advisory and Securities (India) in a September 18 report. Note that the actual price cut for consumers depends on how the discount on Maruti’s cars is calibrated. This strategy is a direct response to the falling question in the car segment at entry level. This segment loses the market share due to the growth of poor revenue, rising costs and a growing consumer preference for SUVs. As a result, Maruti’s overall market share has shrunk over the past five years (see map), with the most affected entry segment. Attention will now shift to the effectiveness of these sharp price cuts, as the company is waiting to see if they encourage car purchases among the population with lower income and in turn increase the market share. The Nomura analysts emphasize the dual nature of this strategy. Although the initiative may initially affect the average sales prices of the business (ASPs) and profit margins in the short term (possibly with as much as 100 basis points), it also keeps the promise of long -term gains. If the reaction of the consumer is positive, the increase in sales volume may improve Maruti’s market share and operating lever. The immediate response of the market to the price reduction was favorable. Maruti’s shares reached a new 52 -week high of £ 16,060 each on Friday. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Maruti Suzuki #mark to Maket Read the following story