India’s largest carmaker Maruti Suzuki announced this week that it would increase prices of its vehicles in January, a practice that has almost become ritualistic for other car manufacturers as well. But analysts and industry watchers say that the annual exercise is a tactic aimed at enticing customers to buy before the year-end and clear piled up inventories before the start of the next year, when the value would typically suffer from a sharp depreciation.
The actual price increase in the price of the vehicles on the ground is usually quite negligible, a leading Maruti Suzuki dealer said.
“Next year prices will increase anyway if companies will launch vehicles complying with the BS 6 norm then there will be some increase. Otherwise, for Maruti the increase will not be substantial considering the market situation," added the dealer mentioned above.
Maruti has not disclosed from which date prices will increase for its offerings next year.
“Over the past year, the cost of company's vehicles has been impacted adversely due to increase in various input costs. Hence, it has become imperative for the company to pass on some impact of the above additional cost to customers through a price increase across various models in January 2020. This price increase shall vary for different models," Maruti said in a press statement.
Competitors like Hyundai Motor India, Tata Motors Ltd, Mahindra and Mahindra Ltd and others are also likely to follow suit.
Over the years, this practice has led consumers to believe that December is the best month for buying vehicles because of wide-ranging discounts offered to customers, not to mention price increases touted for January.
According to Mitul Shah, analyst, Reliance Securities, December is usually a good month for retail sales and this year manufacturers will increase their offers to reduce inventory..
Amid slowing sales, this year automobile manufacturers almost went overboard in offering discounts to attract customers during the festive season that started from September-october. Maruti Suzuki offered almost ₹1 lakh discount on their diesel vehicles like Vitara Brezza to get rid of the BS 4 vehicle inventory.
“In the early 2000s, companies used to take the same strategy before the budget and now it is in December. The price hikes in January are usually negligible unless someone is graduating to BS6 which is not a factor in Maruti’s case," added a former Maruti executive. “Hence, they didn’t mention the date of implementation and the quantum of discounts. It’s a ploy to attract as many customers as possible during the month," added a former executive of the company.