Maruti Wins Big with Discounts, Pak Suzuki Can’t

Last month we published an article regarding Suzuki’s approach in dealing with declining sales in two different markets on either side of the border– Pakistan and India.

Related: Suzuki’s Troubling Sales on Both Sides of the Border and the Way it Responds

Maruti Suzuki has been struggling with slow sales in highly competitive Indian market, whereas PakSuzuki is facing a similar situation in a highly monopolized market where it faces no competition whatsoever. In India, Maruti has been offering massive discounts to revive declining sales, whereas in Pakistan there is no concept of reducing prices or discounts, in fact Pak Suzuki has substantially increased the prices of its newly launched Alto 660cc twice within a span of just three months, even when there is no addition duty or tax added by the government and Rupee stands stable, in fact has improved by 4.5% during the last couple of months.

In India, Baleno RS price has been slashed by INR 1 lac (PKR 2.19 lac) whereas other major discounts include Ignis up to INR 57,000 (PKR 125,000), Suzuki S-Cross up to INR 1.13 lac (PKR 2.48 lac), Suzuki Ciaz up to INR 87,700 (PKR 125,000), Suzuki Alto up to INR 65,000 (PKR 142,730), Suzuki Vitara Brezza up to INR 1.01 lac (PKR 2.21 lac), Suzuki Swift up to INR 77,700 (PKR 170,610) and Suzuki Dzire up to INR 84,100 (PKR 184,670) to name a few. According to Ajay Seth, CFO of Maruti Suzuki while commenting on discounts offered by Maruti Suzuki said:

    “If demand continues to be weak, then obviously discounts will continue. It is a chicken and egg situation. All of us have surplus capacity and if we don’t utilize it then we are sitting on a huge fixed cost overhang. So we have to choose between the devil and the deep sea.”

Now all those discounts have started to pay off as Maruti Suzuki registered 141,848 unit sales in October which is 28% higher than figures from September. This also marks a 4.3% improvement over sales of the same month a year ago. Maruti is among the few auto manufacturers to register positive growth on a year-on-year basis, as the company is working hard to stay on track in the penultimate months of this calendar year. Furthermore as India is adapting more stringent Bharat-VI emission standards from April 2020, Maruti has decided to completely discontinue diesel variants from its lineup, so its dealerships are offering massive discounts on existing stock of diesel models.

Over here however, Pak Suzuki is suffering from a dreadful 64% decline in sales, sparing Alto 660cc which is selling in decent numbers. Sales of WagonR took a dip by 76% to 2,698 units, Bolan sales declined by 72% to 1,505 units, Cultus with 34% reduction to 4,777 units, Ravi declined by 47% to 5,289 units and Suzuki Swift reduced by 63% to just 675 units in the first 4 months of this fiscal year.

Related: Pak Suzuki Suffering from a Massive Decline in Sales

Collectively these 5 Suzuki models (Swift, Cultus, WagonR, Bolan & Ravi) sold 31,151 units combined in the first 4 months of previous fiscal year, however this year with a reduction of -64% the collective sales hovered at just 11,635 units. This also reveals that the cumulative sales of all 5 Suzuki cars are 31% less than that of Alto 660cc alone.

Pak Suzuki also recorded a loss of Rs 1.16 billion in the quarter ended September 30, 2019 owing to slow sales. This is the fourth quarterly loss for Pak Suzuki in a row, however the situation looks even bad when you take in account the company’s performance in the first 9 months of this calendar year (from January 1, to September 30, 2019), Pak Suzuki recorded a loss of Rs 2.69 billion whereas it had posted a profit of Rs 1.39 billion in the same period of previous year.

Related: Rupee Continues to Recover Against Dollar- Will Car Prices Come Down?

Around the world, reducing prices or offering discounts & benefits is considered a proven recipe to recuperate the declining sales. Automakers in competitive markets offer discounts in various circumstances to boost the sales of their vehicles. However it is beyond understanding why auto assemblers operating in Pakistan including Pak Suzuki prefer posting losses instead of reducing some of their margins to lift the deteriorating sales.

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