New Delhi, June 1: Car makers are offering a slew of discounts and freebies to buyers at a time of spiralling interest rates and escalating costs of raw materials.

Intense competition within the industry, with multiple car launches and upgradation of existing models, has forced companies to stay on their toes to win customers.

“Frequent discount offers and new product offerings help companies push up flagging sales at a time when the industry is facing immense competition,” said Jnaneswar Sen, director-marketing of Honda Siel Cars India. The car maker today said it was cutting the prices of its sedans by up to Rs 5,000 because of the reduction in the central sales tax.

On the one hand companies have raised prices on account of input cost pressure while on the other, they have offered huge discounts to more than mitigate the impact of the price rise.

Country’s largest car manufacturer Maruti Suzuki India hiked prices of the petrol version of WagonR by Rs 2,000, while dealers offered a discount of Rs 18,000-20,000 on the model.

Dealers of Alto are offering a discount of about Rs 11,000 to more than offset the price revision of Rs 1,500. Other players are also offering similar discounts to attract customers. Dealers of Tata Motors are offering Rs 20,000 cash discount on the popular diesel Indica model.

According to Arvind Saxena, senior vice-president of Hyundai Motor India Ltd, “The Indian automobile industry has become a battle ground not in terms of competition within models but also in terms of marketing of products.

“The whole of last year saw original equipment manufacturers widening their product portfolio. They have also become very aggressive in offering discounts and promotional schemes to retain their market share,” he said.

The automobile industry posted a 4.7 per cent dip in growth at 96,48,105 units in the 2007-08 fiscal compared with 101,23,988 units in fiscal 2006-07.

Interest push

High interest rates on auto loans are also prodding the companies to offer discounts. The interest rate on auto loans has gone up 25-30 per cent over the last two years. It is currently hovering around 13.5-14.5 per cent and this has impacted sales.

Over 80 per cent of vehicles in India are financed, unlike China where only 50 per cent of the buyers opt for auto finance.

Among other companies offering discount, General Motors is offering an air-conditioned-base version of the Spark at Rs 2.89 lakh (ex-showroom Delhi) that, dealers said, is over Rs 30,000 less than the original price.

Korean firm Hyundai is offering free insurance on its entry-level car Santro. This implies that a car buyer will have to cough up Rs 10,000 less.