Maruti offers discounts on Swift for the 1st time, shares fall in price

Maruti Suzuki is offering discounts on its best-selling Swift and D'Zire models for the first time, dealers told NDTV on Friday. Maruti Swift, introduced in May 2005, is the largest selling premium compact hatchback in India with sales in excess of 150,000 units every year.

Dealers told NDTV that Maruti is offering 2-3 per cent discounts on all models of Swift and D'Zire. The discounts are for both petrol and diesel variants, they said.

Maruti has continued to outperform the auto industry on the back of strong growth in Swift and D'Zire volumes. Car sales slumped 25.7 per cent in February, the biggest fall in more than 12 years, but Maruti' s market share rose to 53 per cent in February compared to 45 per cent in the eleven months of the fiscal so far.

Swift and D'Zire account for 35 per cent of Maruti's total volumes per month. Moreover, they are high margin models. Earnings before interest, tax, depreciation and amortization (EBITDA) for the Swift and D'Zire models are in the range of Rs 40,000- Rs 45,000 per unit against an average of Rs 25,000 for Maruti's entire portfolio of models, analysts said.

Maruti shares slipped for the third straight session on Friday. Maruti shares were down 0.31 per cent to Rs 1,304 and underperformed the broader BSE Auto index, which traded with 0.5 per cent gains. Maruti shares are now down over 7 per cent over the last week against a 4 per cent drop in the BSE Auto index.

Traders are worried that increasing discounts on these popular models will eat into Maruti's margins.

Meanwhile, Jagdish Khattar, former managing director of Maruti told NDTV that the discount and subvention schemes are unlikely to be very effective as far as boosting sales in concerned.

"The overall sentiment is not so good. Rate of interest remains high and fuel prices have been going up," Mr Khattar said.

The March quarter is considered good for auto sales, but the next quarter is likely to be lean because of holidays and monsoons, he added.