car sales: No Diwali discounts? Parts shortage, hefty freight may reduce price markdowns on cars, phones – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/services/retail/this-year-discount-the-festive-discount/articleshow/85819188.cmsSynopsis

Discounts and consumer promotion offers on cars, smartphones, televisions, laptops and refrigerators will be among the lowest ever in the upcoming festive season.

Discounts and consumer promotion offers on cars, smartphones, televisions, laptops and refrigerators will be among the lowest ever in the upcoming festive season. Manufacturers expect demand to outstrip supply as they scramble to improve inventory levels amid component shortages and skyrocketing freight rates.

Executives of several leading brands said discounts have moderated since July-August and were low even during the Independence Day sales. Discounts on cars have narrowed 30-50% in recent months, from pre-Covid times. Carmakers are sitting on close to half a million bookings and numbers are swelling amid lower supply and sustained demand.

“Promotions and discounts will be among the lowest this festive season due to supply issues, which were not as acute last year,” said Nilesh Gupta, director of electronics retail chain Vijay Sales. Already, most brands are not able to provide inventory as required and some products such as large-screen televisions are stocked out.

Supply Chains Under Stress
Discounts have shrunk since demand momentum has picked up, while supplies have been disrupted, said Shashank Srivastava, senior executive director, sales and marketing, at India’s largest car maker Maruti Suzuki.

“Discounts are significantly lower than what one has seen over the last few years and it is expected to either remain the same or fall further, given that demand has bounced back and supply is under stress,” said Srivastava.

According to automotive consultancy firm JATO Dynamics, average incentives on hatchbacks have dropped almost 40% to Rs 15,500, compared with benefits extended two years ago. For sedans and sport utility vehicles, they have more than halved to Rs 13,000-15,000.

Given production constraints, prices will rise and incentives will decline, said JATO Dynamics India president Ravi Bhatia. The game has shifted from market share to profitability, as original equipment manufacturers (OEMs) emerge from the hit they took during the pandemic.

“We have seen one of the steepest falls in retail incentives used by vehicle makers to drive demand and sales conversion,” he said. “Production is impacted by supply chain and semiconductor availability. We are beginning to see long wait times, from four to 12 weeks, displayed at dealerships.”

Year’s Best Prices
Consumers can still look forward to some of the best prices or offers for the year during the festive season, especially in consumer electronics and smartphones, as manufacturers want to grow their business over last year, which was an all-time record sales period. There will be scope for additional discounts through bank offers at Amazon, Flipkart, Reliance Digital and Croma.

However, industry executives said average discounts will be lower and there might be moderate online discounts only on a handful of models that are not fast-selling or where brands enter into special partnerships to drive traffic.

“While smartphone companies are trying to aggressively build their shipments this quarter for the festive sales, they are likely to be lower than last year,” said IDC India research director Navkendar Singh. “Average festive discounts will certainly be the lowest ever this year for smartphones, even when ecommerce sellers may try to pass on some discount. For laptops, prices are going up every month in low single digits and festive discounts will be virtually absent.”

Rising Costs
Freight costs have gone up two to three times from last year due to the acute shortage of containers, while the scarcity of semiconductors is at an all-time high, with largest chip maker TSMC to further increase prices 10-20%, according to media reports. Prices of television panels are up 80% from last year and there’s been a 70-80% increase in the price of commodities such as copper and steel.

Maruti Suzuki has announced plans to raise prices in September, the third time it will be doing so this year. Prices could rise for laptops, some smartphone models, televisions and appliances since manufacturers are still absorbing 5-10% of the increase in input cost.

Avneet Singh Marwah, chief executive of SPPL, the company that sells Thomson, Kodak and Blaupunkt TVs online, said TV prices are already up 30-35% from last year. “Average discount in online marketplaces will be about 15% during the festive season, as compared to 20% last year. Still, it will be the best price of the year,” he said.

Smartphone maker Realme India marketing head Francis Wong said the company is building stock by adding new suppliers for components, including processors. Since the festive season is a key growth driver, the company will try to have similar offers as those last year, he said.

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