India: Japanese car companies like Honda, Maruti Suzuki and Toyota start a price war after dip in July sales

The Economic Times (New Delhi) - Japanese carmakers Honda, Maruti Suzuki and Toyota have taken the lead as the Indian car market speeds into an imminent price war after slipping into the negative zone for the first time in 30 months in July.

Honda Siel, which slashed the price of its flagship City sedan by up to Rs 66,000 last month, will soon launch a new version of its Jazz hatchback with a much more affordable price tag - dealership sources say it will be around Rs 6 lakh, or more than Rs 1 lakh less than the previous model that was sold out last month through a huge discount offer.

Maruti Suzuki too will introduce the new version of its popular premium hatchback Swift with several added features including variable valve timing (VVT) for added power in the petrol engine, fiber fuel tank for lighter weight, tilt steering and indicators on side mirrors in the new car that is bigger by 40 mm for extra legroom for its passengers.

The new changes in the specs will make the car more punchy against new entrants like Polo and i20 that carry more features than the outgoing Swift and will be launched on 17 August, but without much increase in price. Toyota has already introduced its entry-level Etios sedan and Liva hatchback at prices lower than most competitors. Infact, Liva is priced much cheaper at Rs 3.99 lakh than its competition like Maruti Swift and Skoda Fabia.

"There has been some rapid changes in the market. Earlier, it was Toyota with the killer pricing of its new Etios, and then Honda cut prices of its top selling cars. Now Maruti is expected to bring top-line with some aggressive prices," said Abdul Majeed partner automotive practice, Pricewaterhouse Coopers.

UNPRECEDENTED AGGRESSION

In the car market, dealers say Japanese automakers are now providing unprecedented support by speeding up delivery after recovering from the earthquake and Tsunami of March this year and offering price cuts to preserve or increase their market share.

"The July sales have come as a sharp indicator and discounts and price cut will become inevitable to maintain the momentum in sales," Maruti Suzuki Chief General Manager (Marketing) Shashank Srivastava says.

Domestic car sales is estimated to have dipped 10% year-on-year in July, the first fall since January 2009, as increasing overall inflation, rising loan interest rates and fuel prices impacted consumer sentiment. Maruti Suzuki, Hyundai and Tata Motors-which together sell threefourths of all cars sold in the country-all suffered double-digit drop in sales.

"We are not going for any price changes but discounts and freebies could definitely rise to counter competition," Srivastava says. If Maruti Suzuki, which still sells almost every second car sold in the country, is preparing to protect its ground against increased competition, Toyota, the world's largest carmaker, wants to emerge a top player to stay ahead of Volkswagen and General Motors in the global race.

And Honda clearly has stepped on the gas after watching Volkswagen Vento, Hyundai Verna and even Maruti SX4 driving past Honda City that dominated the mid-size sedan segment for a decade, and losing out to Volkswagen and Ford in the overall market.

Honda managed to jump back to positive sales in July backed by the Rs 66,000 price cuts on City and a massive Rs 1.7 lakh discount on the Jazz hatchback, which was sold out in three days flat. Honda will roll out a new Jazz later this month, which dealership sources expect to be around Rs 6 lakh, down from Rs 7.12-Rs 7.80 lakh.