Discounts jump to 20% in commercial vehicles segment

Truck, bus manufacturers and their dealers are shelling out steeper discounts.

Discounts jump to 20% in commercial vehicles segment
Discounts jump to 20% in commercial vehicles segment

Truck, bus manufacturers and their dealers are shelling out steeper discounts.

The battle to gain pole position in Asia’s third largest market has been joined in right earnest by major players such as Tata Motors, Ashok Leyland, Eicher Motors and Mahindra & Mahindra. Industry sales of the normally lucrative medium and heavy commercial vehicles (M&HCV) during April-October 2017 declined by 5 per cent at 154,843 units, down from 163,648 units sold last year. However, light commercial vehicles sales jumped 14 per cent at 268,292 units in April-October 2017, up from 235,402 units sold in the previous year. Industry honchos and auto analysts said while up to 15 per cent discount was standard during the last three-four years, it has now shot up to about 20 per cent to attract buyers.

They also said some major players camouflage discounts in offering freebies and spare parts for those fleet owners opting out for three to five years’ annual maintenance contracts (AMC) with large automakers in the country. “The price discounts on commercial vehicles gained momentum during the last three-four years,” Subrata Ray, senior group vice-president at Icra Research, told Financial Chronicle.
He said while companies raised prices of commercial vehicles, especially during the transition period from the BS III emission norms to BS IV, automakers did not decrease the discounts and freebies to lure buyers.

“In fact, discounts were offered to the tune of Rs 3 lakh to Rs 5 lakh per vehicle to strike lucrative deals and increase their declining market share,” Ray pointed out.

“We have clearly noticed the high level of discounting in the industry, especially in Q2, which was far greater than Q1,” Vinod Sahay, CEO, trucks & buses at Mahindra and Mahindra told Financial Chronicle.

“Discounts are currently at the highest level that we have seen in the industry so far. This incrementally has posed a big challenge for us,” he said.

But with technologically superior products like Mahindra Blazo, which is the most fuel efficient truck in the Indian heavy commercial vehicle industry and its other guaranteed experiences, the company is able to establish a better value proposition for its products and hence is selling its products at premium over competitors, he said.

“We are not matching the prevailing discounts in the industry,” Sahay pointed out.

At present in the M&HCV segment, Tata Motors has a market share of 47 per cent, Ashok Leyland 33 per cent, Eicher Motors accounts for 11 per cent and Mahindra and Bharat Benz take 4 per cent each.

The Mumbai-headquartered Tata Motors, the biggest commercial vehicle maker by sales, which suffered a loss in market share of 14 per cent in the last few years, is desperately trying to turn the tide with heavy discounts.

Dealer sources said discounts and freebies for Tata commercial vehicles have reached their peak as its dealers are under pressure to meet sales targets.

“While discounting in the market has recently increased, we at Tata Motors do not believe in buying market share by offering steep discounts,” a Tata Motors spokesperson told Financial Chronicle.

“We as an industry need to work towards carefully controlling discounts in the interest of the automotive environment as a whole,” he said.

The recent business turnaround at Tata Motors has come on the back of its strong product portfolio and enhanced customer engagement. “Going forward, we will continue to improve and upgrade our products, while providing our customers with superior value and comfort,” the spokesperson said.

In April-October 2017, the Tata Motors CV business grew by 5 per cent to 193,782 units and last year it was 184,871 units.

Ashok Leyland said as a policy it does not give any discounts, as its sales were robust. When asked about the dealers, it said it was their internal look out.