In a departure from the practice which carmakers have been following for years, several manufacturers, including Maruti Suzuki, Hyundai Motor India and Mahindra & Mahindra, have not raised vehicle prices beginning this month. This may be because poor consumer sentiment continues to impact demand and any price hike may further dent sales, people familiar with the matter said. The companies had, however, announced in December that they would be hiking prices in the new year to pass on the impact of rise in input costs.
Usually manufacturers increase prices twice in a year — January and July — in the range of 2-5% to offset any increase in manufacturing cost during the year. The revised prices are generally rolled out within the first week of January. While there was a price hike taken by all the manufacturers in the middle of 2019, dealers of Maruti, Hyundai and M&M said there was no change in prices from January.
“So far, the prices and discount levels are the same as that of December 2019. We expect a price hike, if any, only on models with the BS-VI engine,” a Maruti Suzuki dealer said. While Maruti Suzuki and Hyundai did not reply to emails till the time of going to press, M&M declined to comment. A Tata Motors’ spokesperson said they have increased car prices from January 3. However, dealers said post the discounts, the effective on-road price for the customer remains the same as it was in December. “We have received a revised price list but after discounts, final price given to the customer is more or less the same,” a Tata Motors dealer said.
Prices are expected to increase as the manufacturers start rolling out models with a BS-VI engine, when the industry switches to the new emission standards from April 1, 2020. Maruti Suzuki has already converted and launched eight models with BS-VI engines, which together comprise 70% of its total volumes. The BS-VI variants were sold starting April last year, and came with a premium of up to `30,000. Others are yet to launch the entire portfolio with the upgraded engine.
Analysts and experts said an early price hike announcement has for long been a marketing tool for many manufacturers to liquidate the year-end stock as consumers usually prefer buying units with the new year registration. VG Ramakrishnan, managing partner, Avanteum Advisors LLP, said this strategy has lost relevance now due to easy availability of finance. “Especially in the current market conditions when demand is so poor, customers worry more about a few lakh than just a 2-3% price hike, as purchases are getting postponed due to several reasons,” Ramakrishnan said.
Nikunj Sanghi, International Director at FADA, who is also a dealer for Mahindra, said mostly manufacturers don’t raise prices due to competitive reasons. “Every manufacturer wants to follow when it comes to price hike. If the market leaders don’t do it, others also wait thinking it may impact their sales,” Sanghi said. A senior official of a leading carmaker said prices were not increased as it is understood that the BS-VI models will be launched at a higher price. “The idea is to liquidate BS-IV models as soon as possible and increasing price on those will become a barrier,” the official said.
Over the last one year, car prices have jumped around 15% on account of rise in insurance premium and safety norms, resulting in a two-decade low sales virtually every month in 2019. During the April-December 2019 period, volumes declined over 16% y-o-y. Poor sales and excess inventory forced manufacturers to offer record high discounts, a move which improved sales slightly during the festive period of 2019, but fell thereafter.
From April 2020, India will move to new emission standards and, as a result, prices will go up, given that manufacturers invest a lot in upgrading the engines. While petrol cars will be expensive by anywhere between `20,000-60,000 — depending on the engine capacity, diesel cars would be costlier in the range of `1-2 lakh. Any unsold BS-IV unit after March 2020 will become unsaleable, impacting profitability of the manufacturers.
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