Mahindra & Mahindra will slash the price of the XUV 500 by up to Rs 33,000. Its present ex-showroom prices vary from Rs 12-14.70 lakh and the reductions will be in the range of Rs 27,000-33,000.
The price cut is a result of M&M lowering the ground clearance for the XUV 500 to sub-170mm which will qualify it for the lower 27 per cent excise duty. Budget 2013 had imposed a 30 per cent levy on vehicles whose ground clearance was higher than 170mm. This also applied to cars and SUVs over four metres long or with engine capacities exceeding 1.5 litres.
M&M’s range of SUVs was affected by the new ground clearance stipulation and prices were hiked in March after the Budget. The XUV 500 will now be fitted with a stone guard, a protective panel under the body, which also serves the purpose of lower ground clearance.
“Monthly sales of the XUV 500 nearly halved to 2000 units from March and I will be happy if the price revision leads to a 15-20 per cent increase in numbers,” Pawan Goenka, M&M’s President (Automotive and Farm Equipment Sectors) told Business Line.
According to him, the excise duty hike was not the only reason for this alarming dip in sales. It is now 18 months since the XUV 500 made its debut and the order backlog has since been cleared. There was no way the initial sales momentum of 4,000 plus units a month could be sustained.
Goenka adds that the auto industry is in the grip of a severe slowdown where sales of SUVs, cars, trucks and two-wheelers have been seeing a free fall for some months. “The excise duty hike did not help matters either,” he says.
Will M&M now go about fixing this ground clearance issue for the Scorpio and Bolero too? After all, fixing a stone guard is a rather straightforward exercise. “We will take a call (on the Scorpio and Bolero) because these are selling well and, by the end of the day, a high ground clearance is the USP for any SUV,” says Goenka.
The XUV 500s heading out to South Africa and Chile will, likewise, retain their original 170mm plus clearance and the reduction will only apply to India. M&M has also indicated that it will continue to invest in new product development even as the slowdown continues.
Goenka is also unfazed by more competitors like the EcoSport and Duster in the SUV space. “Competition is inevitable and it must be remembered that not all SUVs in the market are identical. They operate in different segments and meet the needs of a host of end-users,” he says.
The SUV segment is a big draw for automakers especially when it has managed to weather the slowdown. Goenka has already gone on record to say that India is only 30 years behind the US where the SUV explosion happened in the 1980s. “Every garage then had an SUV and the same trend will be replicated in India,” he said recently.