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GST rate reduction benefits, coupled with price cuts announced by carmakers, have led to a change in the pecking order of the country’s cheapest cars. Eleven years after Maruti Suzuki Alto became the country’s most affordable car, the company’s mini SUV SPresso has replaced the hatchback as the cheapest model.

On Thursday, the car market leader announced price reductions for SPresso, Alto, Wagon R and Celerio, which will be in addition to the GST cuts. These will range between 9% and 24%, a company official said.

Strategic shift in pricing

Effective September 22, the price of the base variant of the SPresso will be reduced to Rs 3.49 lakh, an 18% cut or Rs 76,600. In comparison, the Alto will start from Rs 3.69 lakh after a reduction of 12.5% or Rs 53,100. Prior to the cuts, the prices of the SPresso and Alto were Rs 4.26 lakh and Rs 4.23 lakh, respectively.

The maximum reduction on the SPresso is nearly Rs 1.3 lakh, while the maximum drop on the Alto is nearly Rs 1.08 lakh. The net reduction in prices because of the GST for the company is 8.5%, said Partho Banerjee, senior executive officer, marketing and sales, Maruti Suzuki.

With this move, the company aims to spur demand for the entrylevel models, which has remained abysmal in the last few years due to a surge in prices. Volumes of Maruti’s mini segment (Alto and SPresso) crashed by 35% yearonyear in the AprilAugust period this year.

With the added price cuts, Maruti Suzuki is hopeful that the entry car segment will appeal to the twowheeler owners who are looking to upgrade.

Reviving a stagnant segment

“High car prices, high down payment price and high EMIs were the reasons behind the challenges for the small car segment. The net effect of the GST reduction of 29% to 18% is 8.5%. We have gone beyond that for our twowheeler owners with a special offer,” Banerjee said.  

Maruti’s two other small cars–Celerio and Wagon R–have also been made part of the ‘special offer’. Celerio price will be brought down to Rs 4.69 lakh, a reduction of Rs 94,100 or 17%, while of Wagon R will be reduced by Rs 79,600 to Rs 4.98 lakh, a fall of 13%.

Banerjee said this will be a ‘limited period offer’ and will be reviewed by the end of December.  

He further said the issue of compensation cess, which is bothering dealers since the announcement of the GST rate reduction, is being looked into by different bodies of the industry.  

“With regards to this strategic pricing, we are going to compensate our channel partners. However, for the compensation cess, different bodies are taking up this matter with the government,” Banerjee added.