Car discounts skid to a 3-yr low on supply woes

CHENNAI: Discounts and benefits on buying a car are at a 3-year low with as many as 28 models out of a total of 88 not attracting any schemes whatsoever in 2021, compared to 21 out of 102 in 2020 and 23 out of 106 in 2019. Data compiled by JATO Dynamics, a supplier of auto business intelligence, showed that the average discount level has shrunk more than 50% since 2019 with SUV discounts dropping from Rs 47,000 to Rs 15,000, while small car discounts are down from Rs 43,600 to Rs 13,000 as supply problems plague the market due to semiconductor shortage. This has resulted in customers not getting the cars they want, and not wanting the cars they get. JATO president Ravi Bhatia said, “Navratri retails are not according to expectations. Entry-level cars, despite some schemes, are not selling with customers staying away due to economic reasons. In the higher segments, there is demand but also shortage of vehicles. New launches have a long queue and excitement, but shortage of supplies means there is low conversion of sales.” Part of the problem is of course the already happening shift towards SUVs. Icra group head & VP (corporate ratings) Shamsher Dewan said, “Inventory levels are thin due to chip shortage and there is shift towards mid-sized hatchbacks and compact SUVs.” Car dealers say, like two-wheelers, entry-level cars have also seen demand dip as discounts are cut and prices go up. M&M dealer Nikunj Sanghi, who is managing director of JS4Wheel Motor, said “Entry-level car demand in some markets is down by 30% compared to 2019.” Car prices have increased with companies taking multiple markups citing increase in input costs, including steel. And with discounts down, the tags are not attractive for the two-wheeler upgraders. Toyota dealership Anaamalais Toyota deputy MD C S Vigneshwar said, “There are profitability issues due to raw material prices for manufacturers and, coupled with low production numbers, there is no need for discounts. But lack of discounts is impacting the trigger to get the customers into the showroom, therefore impacting retails too. So, more customers are probably jumping straight into cars above the entry-level Alto or WagonR — into SUVs and premium hatchbacks.” Car dealers say high fuel prices are also playing spoilsport, particularly with the segment that’s just entering the car market and is most sensitive to discounts. “The entry-level car market is behaving like two-wheelers where demand is down 30% compared to 2019 and inventories are at a high of 12-16 weeks,” said Sanghi, who also has Hero MotoCorp dealership in Delhi.

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