Maruti may cut price by Rs 40,000

Maruti may cut price by Rs 40,000
SUNIL JAIN

NEW DELHI, JUNE 20: With inventories adding to nearly 27,000 cars, mostly of the popular M800 model, auto-giant Maruti Udyog Limited is likely to slash prices of this model by as much as Rs 40,000 over the next week or so. In which case, the on-road price of the M-800 standard model could once again come to a little over two lakh mark, at Rs 2,05,000. Prices of the deluxe version could come down from the present Rs 2,90,000 to Rs 2,50,000.

Several meetings have taken place between various Maruti board members, but the government directors on the board are keen to avoid price cuts, especially on the eve of the crucial meeting of the cabinet committee of disinvestment (CCD) on Friday, June 23. Since the department of heavy industy is opposing selling off the government stake in Maruti on the grounds that Maruti's profitability will rise in the future, a sharp price cut would send the wrong signal at this meeting.

The government directors have asked Maruti officials who have been discussing this issue with them, to figure out if there is any other way to resolve the problem without resorting to price cuts which will hit its profitability in a big way. Maruti officials are now examining the possibility of further internal savings, though this looks difficult especially since the company managed to save a little under Rs 200 crore this way last year itself, narrowing the scope for further cost cuts.

Prices of the popular M800 are now around Rs 40,000 more than they were a few months ago. Maruti had hiked prices by Rs 27,000 following the introduction of multi-point fuel injection (MPFI) engines to replace the old carburetor-type one. The hike in sales tax rates, as part of the uniform sales tax regime across the country, ensured the rest of the hike in many states, including the capital.

It is not clear what the actual cut will be, but the company will try and ensure that the net price to the consumer will be roughly the same as before the introduction of the MPFI engine and the hike in sales tax rates.

The M800 is Maruti's largest-selling model, though its popularity has taken a big beating over the past year with the introduction of the Matiz and Hyundai models.