Price Hikes In Car Industry (Maruti)

Auto Price Hikes To Ring In New Year

Prominent Indian car maker, Maruti Suzuki has announced price hikes in its models despite car sales hitting a record low. This move will be implemented by January. There is an expected hike in prices for petrol units with the amount ranging from Rs 15000 to Rs 25000. Similarly there will be a jump in prices for diesel units with in a range of rs 15000 to 70000. This move is meant to combat the rising input costs and has been announced after the telecom companies raised tariff to lighten their financial stress. 

This move is made in lieu of the transition from BS-IV to BS-VI. Maruti has launched 8 BS-VI models as of now.another reason for the sudden price hike is that heavy discounts had put the companies bottom line under pressure. Industry watchers expect other big players in the field to follow suit. Primary steel producers have raised prices by 2.5% to 3% for December. This has been done to address margin compression and in anticipation of a rise in demand.

The index of 8 core infrastructure industries contracted 5.8% for October 2019 which was the lowest since the index was established in 2011-12 as a base year among these 8 industries the steel industry experience a steady decline at a 1.6% fall in October compared to the 1.5% drop in September.

After Maruti's announcement of the price hike which is to be implemented in January,  Mahindra & Mahindra spokesperson said that their company was considering a similar hike in prices. The formal decision will be taken later this month. The increasing transition cost coupled with the rising discounts have put pressure on the firms expenditure there by hitting their bottom line. 

Toyota Kirlosker Motors, decided to bite the bullet as well. The companies Deputy Managing Director, N Raja said that the company was reviewing its price hikes; first from January 2020 and the second one based on the costs of transitioning from BS-IV to BS-VI. The exact price increase would be decided by the end of the month. 

TATA Motors and Hyundai are yet to announce their position in the price hikes. Honda clarified that there would not be any plans for price increase  from January as per the statement issued by Rajesh Goyel, Senior Vice President and Director Marketing & Sales at Honda Cars India. 

Nikunj Sanghi, MD & founder of JS four wheel Motor Pvt Ltd explained that the companies involved in the price hike plans were mostly those with a heavy diesel portfolio as compared to petrol. He also states that Maruti is most comfortably placed in terms of price hike hitting sales as they had withdrawn from the segment for BS-VI.

Mitul Shah, an analyst at Reliance Securities said that as the quantum of price hike is not known, one cannot gauge the impact on demand. He sees the move as a sales tactic to clear the stock of the current calendar year. The economic slow down and the impending BS-VI regulations have prompted companies to announce price hike well in advance.