Maruti sales plan may lose edge on high interest rates

The vendor incentive programme that Maruti Suzuki initiated last year among its 200-odd vendors may not fetch the company the same numbers this year since the market is close to saturation and interest rates have risen.

Last year, vendors' staff bought about 4,000 cars during the three month period ended July 31, 2007.

Maruti Suzuki, which is India's largest car maker, has undertaken several focused marketing schemes in the recent past to push sales in a sluggish market. The vendor incentive programme is one such initiative.

"The principle behind the scheme is to build a solid relationship with our vendors. More than looking at aggressive sales numbers, we view this scheme as a tool that'll help our vendors in  human relations development practices," said a Maruti spokesperson.

Maruti Suzuki offered financing to vendor employees at 8.25 per cent last year to help them buy its cars.

In addition to the showroom discounts that ranged from Rs 12,000 on Maruti 800, Rs 11,000 on Alto and Rs 18,000 on Wagon R and Estillo, it offered an additional discount of about Rs 4,000 to such employees. This year, it has stopped financing the scheme.

Instead, it has tied up with Axis Bank that offers financing at 10.75 per cent with repayment periods of three to five years (market rates are currently at 14 -15 per cent).

In addition to the special vendor discount of Rs 4,000 on A1 & A2 models and Rs 25,000 on the Grand Vitara, the showroom discounts are Rs 10,000 on compact cars (barring Swift diesel).

Krishna Maruti, which supplies car seats and fuel tanks, bought around 200 cars last year, making it the single largest buyer in the scheme. The N K Minda group (supplies switches, lightings and CNG/LPG kits) bought 181 cars and was the second largest buyer. Lumax Industries, which provides automotive lightings, purchased 110 cars.

Already, 20 employees of the company have bought cars under the scheme this year.

"We gave a subsidy of 2.5 per cent to our employees who, as a result, got the financing for six per cent. Further, we advanced the payment of bonuses to help employees fund their down payment for Maruti car purchases," said A K Taneja, president, Shriram Pistons & Rings. The company's employees bought over 100 cars last year.

The Maruti Saga