First time buyers, discounts offered boosts Maruti Suzuki's performance

India’s biggest carmaker Maruti Suzuki put up a good show in the June quarter, this at a time when consumer sentiment continues to be fragile. Maruti’s performance can be attributed to a phenomenon called the 'pushed demand', where it boosted its volume growth by creating demand in markets: it offered higher discounts to attract consumers, who had pinned their hopes on a Modi-led government to deliver on its promise of 'acche din'.

The average discount the company offered in the June quarter increased to Rs 21,000 per vehicle against Rs 17,500 in the March quarter, which improved entry-level passenger car sales by a significant 22% y-o-y to 1.19 lakh units in the quarter under review.

This segment now constitutes about 44% of the total sales, compared with 40% during the same quarter last year. The company even offered discounts ranging from Rs 40,000-45,000 per vehicle for entry-level cars to crank up its volume.


There’s another factor that helped Maruti raise its game: first-time buyers. The sales volumes for first time buyers in the June quarter rose to 43% compared with 39% in the corresponding quarter last year.

The carmaker strategically targeted first-time buyers, offering them higher discounts, turning several such enquiries into sales. Despite the auto industry witnessing a decline in this period, Maruti Suzuki posted a volume growth of 12% on a year-on-year basis.

In a conference call post earnings, the Maruti management said, "After many quarters, the company has witnessed a 12% growth in its urban sales during the June quarter while rural sales increased 26% — both these factors helped the company attain a market share of 44% in the passenger car segment. Our market share was 40.4% a year ago. We have also witnessed a rise in enquiry levels, which have increased by as much as 10%."

The market would, however, keep a close watch on how soon a 'push demand' can change into a ' pull demand'.

The long-term sustainability of sales volume and a change in the demand scenario depend to a large extent on macro indicators like economic growth and job creation.