 "Luxury car prices shoot up on falling rupee")
Luxury car companies such as Mercedes-Benz, BMW and Audi are being forced to revise prices frequently this year, owing to the depreciating rupee.
For these car manufacturers, the high imported content has led to a price rise of about 10 per cent since the beginning of this year. By next month, Mercedes-Benz and Audi would have increased prices thrice, the most in a year. BMW has raised prices twice since January.
However, the price increase pales in comparison to the fall in rupee, indicating the companies are absorbing the fall to a considerable extent. Since January, the rupee has depreciated about 26 per cent, forcing companies to pay more for knocked-down kits and fully-built vehicles imported directly from Europe. Though currency fluctuations have impacted operating margins significantly, these companies haven’t passed on the entire impact to customers to avoid hurting demand.
Pune-based Mercedes-Benz, which regained the position of the country’s top luxury car maker after four years, is set to revise prices from September 1 — it would raise the prices of A-Class, B-Class, C-Class, E-Class and ML-Class models 2.5-4.5 per cent. Eberhard Kern, managing director and chief executive, Mercedes-Benz India, said, “The rising input costs, along with higher import duties, have been creating significant pressure on our bottom lines for quite some time. The constant weakening of the currency and the increase in other relevant taxes further impacted the business adversely.
“Till now, we have been absorbing a significant portion of these impacts, but to run a sustained and profitable business in the long run, revising the prices upwards was inevitable.”
Last month, Audi, the second-largest luxury car maker in India, raised the price of the Q5 sports utility vehicle by Rs 1.52 lakh A6 by Rs 1.80 lakh and the R8 sports car by Rs 4.42 lakh. Prices of its other models were also raised. In March, the company had raised prices 2.5 per cent for all its sports utility vehicles and about 15 per cent for the R8 and RS5, owing to a change in the excise duty structure.
The price rises have started taking a toll on demand. For instance, the rise in Audi sales in the January-June period stood at 21 per cent, at 4,846 units, compared to the corresponding period last year.
Earlier this month, BMW, which is set to launch a small car in the first week of September, increased prices up to five per cent for its entire range, including the Mini range. It had also raised prices in January.
“New models are driving demand. The rupee’s fluctuation has started to dissuade buyers and is making them rethink (on the purchase). If such depreciation (of the rupee) continues, we will have follow suit,” said an executive of a luxury car manufacturer.
This comes at a time when manufacturers are creating room for additional models at their plants. Mercedes-Benz is investing Rs 250 crore in doubling capacity to 20,000 units a year by 2014.
To drive demand, companies are pushing for more locally assembled products, which are priced significantly lower than fully imported products.
NO COMFORT FOR MAKERS
For these car manufacturers, the high imported content has led to a price rise of about 10 per cent since the beginning of this year. By next month, Mercedes-Benz and Audi would have increased prices thrice, the most in a year. BMW has raised prices twice since January.
However, the price increase pales in comparison to the fall in rupee, indicating the companies are absorbing the fall to a considerable extent. Since January, the rupee has depreciated about 26 per cent, forcing companies to pay more for knocked-down kits and fully-built vehicles imported directly from Europe. Though currency fluctuations have impacted operating margins significantly, these companies haven’t passed on the entire impact to customers to avoid hurting demand.
Pune-based Mercedes-Benz, which regained the position of the country’s top luxury car maker after four years, is set to revise prices from September 1 — it would raise the prices of A-Class, B-Class, C-Class, E-Class and ML-Class models 2.5-4.5 per cent. Eberhard Kern, managing director and chief executive, Mercedes-Benz India, said, “The rising input costs, along with higher import duties, have been creating significant pressure on our bottom lines for quite some time. The constant weakening of the currency and the increase in other relevant taxes further impacted the business adversely.
“Till now, we have been absorbing a significant portion of these impacts, but to run a sustained and profitable business in the long run, revising the prices upwards was inevitable.”
Last month, Audi, the second-largest luxury car maker in India, raised the price of the Q5 sports utility vehicle by Rs 1.52 lakh A6 by Rs 1.80 lakh and the R8 sports car by Rs 4.42 lakh. Prices of its other models were also raised. In March, the company had raised prices 2.5 per cent for all its sports utility vehicles and about 15 per cent for the R8 and RS5, owing to a change in the excise duty structure.
The price rises have started taking a toll on demand. For instance, the rise in Audi sales in the January-June period stood at 21 per cent, at 4,846 units, compared to the corresponding period last year.
Earlier this month, BMW, which is set to launch a small car in the first week of September, increased prices up to five per cent for its entire range, including the Mini range. It had also raised prices in January.
“New models are driving demand. The rupee’s fluctuation has started to dissuade buyers and is making them rethink (on the purchase). If such depreciation (of the rupee) continues, we will have follow suit,” said an executive of a luxury car manufacturer.
This comes at a time when manufacturers are creating room for additional models at their plants. Mercedes-Benz is investing Rs 250 crore in doubling capacity to 20,000 units a year by 2014.
To drive demand, companies are pushing for more locally assembled products, which are priced significantly lower than fully imported products.
NO COMFORT FOR MAKERS
- Though since January the rupee has depreciated 26% against the dollar, luxury car makers, which import most parts, have been able to increase prices only 10%
- Despite operating margins taking a hit, makers cannot pass the rising import costs fully as that would pull down demand
- Mercedes-Benz plans price increases of 2.5-4.5% from September 1
- In March, Audi raised prices 2.5% of all SUVs and 15% of the R8 and RS5 models