Auto buyers may feel inflation pinch
2 min read 23 Mar 2023, 11:38 PM ISTTop automakers announce price hikes starting next month
PremiumVehicle prices across commercial, passenger, and two-wheeler segments are set to rise starting 1 April, as stricter BS-VI phase II emission rules kick in and automakers pass on the impact of input cost inflation.
Top Indian automakers such as Hero MotoCorp, Maruti Suzuki and Tata Motors have announced price increases across their product portfolios starting next month. Others are expected to follow suit soon. The price hikes range from 2% for Hero MotoCorp’s two-wheelers to 5% for Tata Motors’ commercial vehicles. Maruti Suzuki, which does not sell the more polluting diesel models, said it is evaluating the extent of the increase. The auto industry has been grappling with rising costs of raw materials, parts and freight for the past two years.
“The company (Maruti) continues to witness increased cost pressure driven by overall inflation and regulatory requirements. While the company makes the maximum effort to reduce costs and partially offset the increase, it has become imperative to pass on some of the impact through a price increase. The company has planned this price increase in April, which shall vary across models," Maruti Suzuki said in a statement.
It’s not just price increases; the auto industry faces several headwinds that could slow sales growth from the second quarter of the year starting 1 April, industry executives said. Other reasons that may affect sales growth include long waiting periods for new models and brands losing customer loyalty, expensive vehicle financing and the risk of a weak monsoon due to El Nino hurting rural demand, they said. Luxury carmaker Mercedes Benz, for instance, is planning new product introductions depending on the availability of semiconductor chips.
“We see the holding power of brands is going away - customers no longer want to make a booking for a product which has a one-year waiting period. They will simply go to rivals and buy the product that’s available off-the-shelf. So, that is slowing down new bookings, which have long waiting periods. We may see this impact and high-interest rates playing out from Q2 onwards. For now, we still have 5,000 pending bookings, which will hold us in good stead in the immediate term," said Santosh Iyer, managing director and chief executive of Mercedes Benz India.
“The industry still has about 725,000 pending bookings. For Maruti Suzuki, this number is 414,000 vehicles. We will have to watch out for how the new prices will affect demand, as there are other negative elements like high inflation, higher interest rates on auto loans, and the El Nino weather pattern, which can adversely impact the monsoon and, therefore, rural demand. So there may be other red flags, apart from semiconductor availability and the resurgence, if any, of covid-19," said Shashank Srivastava, executive director of Maruti Suzuki.
“We are seeing supplies get affected in this transitory period as the industry migrates to BS-VI and OBD-II norms, so waiting periods, especially for in-demand vehicles, are still high. The Gudi Padwa festival, which is largely localized to Maharashtra, didn’t respond up to expectations, but the Navratri week will certainly lift up sales, and we will close March with a single-digit growth in the industry," Manish Raj Singhania, president, Federation of Automobile Dealers’ Association.
