Auto companies seen increasing discounts to clear inventory

With weak passenger vehicles retail demand in February, Original Equipment Manufacturers (OEM) are expected to increase discounts on their product offerings starting in March. On top of the discounts automobile dealers will likely offer additional benefits to the consumers to clear passenger vehicle inventory, that has been piling up at their end.

“We started to see the dip in sales towards the end of January after the price hike was implemented. The present discounts on specific models start from ₹2,000 and go upto ₹30,000. However, the discounts will increase in March. We are also offering additional freebies to consumers to promote vehicle sales and clear inventory,” said an automobile dealer.

According to analysts, pre-buying of passenger vehicles and the fall in stock markets have resulted in the softness in demand. In February discounts on major models across companies have ranged from ₹2,500-75,000, some of them showing substantial increase from January, according to analyst data.

“The sales and walk-ins in February in the first two weeks have been subdued. The response has been less than what was anticipated by the dealers. With the tax relief, we expect the passenger vehicle sales to pick up in March and April,” C S Vigneshwar, Federation Of Automobile Dealers Association (FADA) President told businessline.

Discounts include cash discounts, exchange discounts and other incentives.

While inventory levels have come off the peak of 80-85 days seen after the festive season, at current levels of 40-plus days, dealers are struggling to get the inventory moving off their showrooms.

Indian automobile companies implemented price hikes of up to 3 per cent on passenger vehicles in January 2025. The automobile industry reported a tepid increase in wholsesales in February at 3,81,000 units as compared to 3,72,000 units in the same month last year, according to the data released so far by individual companies.

“The February retail sales are one of the weakest over the past few years with a double-digit decline across segments,” Nomura said in a note. According to its channel checks it has estimated 14 per cent fall in passenger vehicle, 12 per cent fall in 2-wheelers and 11 per cent decline in sales of trucks. Its dealer surveys showed that underlying retail demand was slow. Pointing out that dealer margins were under pressure, it said, “we see a risk of rising discounts from March-2025 onwards.”

“We believe there was pre-buying with heavy discount-led sales by OEMs in December 2024, followed by price hikes from January/February 2025, a fall in stock markets could have impacted consumer sentiment,” it pointed out.

Earlier in 2024, automobile dealers had offered discounts upto ₹70,000 on passenger vehicles amid high inventory stocks.