A weaker rupee against the US dollar and the Japanese yen along with margin sustenance pressures have forced companies to raise prices.
Consumers will need to fork out more for car and sports utility vehicles in the new year, with automakers readying a Rs 4,000-30,000 increase in prices across categories effective January.
Manufacturers, including Hyundai, Honda, Toyota, Renault, Nissan, Skoda and Audi, would be increasing prices next month in the range of one to three per cent.
A weaker rupee against the US dollar and the Japanese yen along with margin sustenance pressures have forced companies to raise prices.
The country’s second-largest car maker, Hyundai, on Wednesday said it would increase prices across the range by up to Rs 30,000, including on the sports utility vehicle, Creta that was launched in July.
“We are constrained to increase the price on account of factors like increase in cost of components and the weak Rupee”, said Rakesh Srivastava, senior vice president (sales and marketing) at Hyundai.
Toyota, too, said it would increase prices by up to three per cent from January next year.
“There has been an increase in the cost of manufacturing vehicles. Foreign exchange rates have remained at high levels of above Rs 66/$ for quite some time now. Toyota has been absorbing the additional costs all this while. However, due to the continued pressure of high costs, Toyota is considering an increase of up to three per cent”, said N Raja, director and senior vice-president (sales and marketing) at Toyota Kirloskar Motor.
Manufacturers are drawing confidence from the sales growth witnessed in the first eight months of the year when the industry grew by 8.5 per cent against 3.9 per cent growth in the year ended March 31, 2015. Hyundai and Honda sales have closed 16 per cent up in April-October. Honda is also looking to raise prices across the board.
“We will increase prices from early January. We are still working on the quantum of the hike”, said Jnaneswar Sen, senior vice president (sales and marketing) at Honda Cars India. Nissan and Skoda too have decided to hike prices from next month.
Car market leader Maruti Suzuki and the country's fifth largest car maker Tata Motors said there is no immediate plan to increase prices as of now.
But manufacturers usually go for a price increase in the month of January every year. This would be the second price increase in six months by manufacturers.
Hyundai and Maruti had raised prices in August too. Mihir Jhaveri, director-research analyst (auto and auto ancillaries) at Religare says companies usually go for an increase in January.
“The market is ready to accept a (price) change. There could be a slight impact on four-wheelers demand but sales would not come down”.
With this scheduled increase pricing power seems to be back for select companies who have better ability to pass on the cost pressures.
This is true for companies who have had accelerated success with products such as Hyundai Creta, Grand i10 and i20, Honda Jazz and City and Renault Kwid.
R C Bhargava, chairman, Maruti Suzuki said, “Overall industry is still under pressure and demand has not returned fully. So pricing power may be true only for a select few whose products have done well. Still discounting levels are very high.”
December is a time when discounts remain reluctantly high with customers preferring to rather commit a purchase in the New Year.
Therefore, Maruti Suzuki is offering cash discounts of Rs 25,000 on Alto, Rs 15,000 on Celerio, Rs 10,000 on Wagon R and Ertiga.
A Maruti Suzuki dealer for Delhi said there has been an increase of Rs 5,000-10,000 compared to November.
Hyundai is offering gift cheques and free insurance on a number of models.
On Eon, it is giving a gift cheque of Rs 20,500, i10 has a gift cheque of Rs 14,000, Grand is coming with a cheque of Rs 8,000-10,000 and Xcent buyers can get a gift cheque of Rs 5,000-7,500.
A cheque of Rs 20,000 is being offered on both the sedans-Verna and Elantra. Other players like Honda, Mahindra and Nissan are also offering high discounts.
Leading luxury car maker Mercedes has indicated it will hike prices by up to 2 per cent from January, citing rising input costs.
Competitor BMW has also decided to raise prices by up to three per cent from January.
There is a high import component in luxury cars and a weaker Rupee pushes the cost up.
WEAK RUPEE VS DOLLAR
Firms push 2015 inventory with heavy discounts
Hyundai, Honda and Toyota to hike prices by up to 3% from Jan
Companies cite rising input cost and weak rupee as reasons
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