Automakers cite rising input and logistics costs, depreciating rupee for the increase
Vehicle manufacturers may be lining up year-end discounts to push sales, they are all set to hike the product prices beginning new year as they grapple with rising commodity prices, depreciating rupee and logistics costs.
The price hike may be in the range from a few thousands to couple of lakhs of rupees for more expensive ones. The vehicle manufacturers including Mahindra & Mahindra (M&M), Hyundai, Tata Motors, Mercedes, Maruti Suzuki had increased prices in August for the same reason.
The latest to announce the price rise is market leader Maruti Suzuki, which sells every second car in India. The company in a regulatory filing on Wednesday said the cost of the company’s vehicles has been impacted adversely due to increase in commodity prices and foreign exchange rates, among others. “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 2019. This price increase shall vary for different models,” Maruti Suzuki’s chief general manager, Sanjeev Grover said.
Similarly, Toyota Kirloskar Motor (TKM) will increase the prices by up to 4%. The company in a statement said it considered the price hike after periodically reviewing the continuous pressure of increasing manufacturing costs, which is also a general industry phenomenon. “There has been an impact on the cost of manufacturing of vehicle primarily due to rupee depreciation. Toyota has been absorbing the additional costs all this while, protecting the customers from price increase. However, due to the continued pressure of high costs, we have to pass on a part of it to customers. Toyota is considering a price increase of up to 4% across models with effect from 1st Jan 2019,” the company said.
Japanese manufacturer Isuzu Motors India, too, will increase the prices of its range of D-MAX pick-ups and mu-X SUV with effect from new year. The increase is expected to be 1-2% for the commercial range - D-MAX Regular Cab & D-MAX S-CAB and 3-4% for its lifestyle and adventure Pick-up – D-MAX V-Cross and mu-X SUV. The price increase will be in the range of Rs 15,000- 1,00,000 (ex-showroom), across models /variants. The increase in price is due to the increasing input and distribution costs.
German luxury car maker BMW, which sold over 9,800 cars in India last year, is likely to increase it by around 4% from the start of next year, the sources said.
Sridhar V, partner, Grant Thornton India LLP, said that the new year is the time for OEMs to have a re-look on their business strategies including the pricing. “ OEMs have been holding on to pass on the cost increase arising out of spike in commodity prices and other input costs including change in forex rates”.
The development comes as domestic passenger vehicle sales slowed down to 6.1% during FY2019, amidst sluggish customer sentiments due to high fuel prices and rising interest rates, claim an Icra report. Moreover, factors like floods in Kerala (during peak Onam season), delayed festive season and high base of Q2 FY2018 also weighed on overall growth rate during Q2 FY2019 resulting in domestic wholesale PV dispatched declining 3.6%.
TOUGH ROAD AHEAD
- 4% – price hike Toyota will take on its vehicles
- Rs 1,00000 – price increase likely by Isuzu
- 1-2% – price hike by Isuzu on commercial range
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