Maruti Suzuki faced a double-digital year-on-year dip in the profit last quarter of 2018 due to the hefty discounts provided by the brand. RC Bhargava, chairman of Maruti Suzuki, has said that providing discounts to clear the stocks of the vehicles can change the customer behaviour eventually.
In the third quarter of 2018, Maruti Suzuki India offered hefty discounts to clear the unsold stocks in the dealerships. On an average, Maruti Suzuki offered 24,300 discount on the unsold inventory after the sales saw a dip over the time. This was the highest discount provided by Maruti Suzuki compared to the Rs. 18,800 average discount provided in the second quarter of the year and Rs. 19,400 average discount provided between April-December, 2018.
According to RC Bhargava, customers get used to the discounts and start seeking the discounts round the year according to an article on ET Auto. This creates a negative impact on the profits, and as we have already seen, the profits tend to dip over time.
Manufacturers often provide discounts to push the sales of the vehicles in the market. The high discounting happens during the festive season when most of the car buyers shop for the new vehicles and end of the year when most of the dealers try to push the unsold stock into the market to avoid further depreciation on the existing stocks.
Maruti Suzuki also follows the same strategy to offer heavy discounts on the vehicles in order to push sales. However, in the near future, such discounting from the brand may get discontinued or get a maximum limit. Maruti Suzuki suffered 17.21 per cent drop in the third quarter profit last year. The 2018 year also marked the consecutively second year where the manufacturer saw negative growth. Maruti Suzuki is the largest manufacturer in the Indian market and has over 50% of market share in the Indian market.
Maruti Suzuki has launched two new products in the Indian market in 2019. The first launch of 2019 came in the form of the all-new Maruti Suzuki WagonR, which takes on the likes of Hyundai Santro in the Indian market. The second launch was the facelifted Maruti Suzuki Baleno, which gets additional features and minor updates on the outside and the inside. Maruti now plans to launch their all-new 1.5-litre diesel engine, which was developed in-house by the brand. The all-new diesel engine will replace the current 1.3-litre diesel engine from the cars next year. Maruti will offer the all-new 1.5-litre diesel engine with the Ciaz and the Ertiga later this year. It is also possible that Maruti will offer the new engine with the S-Cross at a later date.
There are also new cars that will be launched by the brand in the Indian market later this year. Maruti Suzuki is also planning to launch the all-new Future-S concept compact SUV that will be positioned below the Maruti Suzuki Vitara Brezza and will take on the likes Mahindra KUV 100.