 "From budget to luxury, cars to get more expensive from January 2024")
Come January, car buyers will be shelling out more for their new ride. At least four automakers have announced plans to raise prices because of cost pressure and overall inflation.
Maruti Suzuki India Limited (MSIL), the country’s largest passenger carmaker, on Monday said that it would raise prices for its models in January. Tata Motors Limited (TML), the leading maker of electric passenger vehicles, will also go for price hikes across its range in January, although it is yet to divulge the extent of the increase. Mahindra & Mahindra, too, will increase the prices of its automotive products in the new year.
Luxury car buyers will also need to dig deeper into their pockets. Audi India has announced a price increase of up to 2 per cent across models from January. When contacted, a Mercedes-Benz India spokesperson said the company was contemplating a price hike in the new year.
The carmakers cited high cost pressure, driven by overall inflation and increased commodity prices, behind the price hike plans.
MSIL said in a regulatory filing: “The company has planned to increase the prices of its cars in January 2024 on account of increased cost pressure driven by overall inflation and increased commodity prices." It further said while MSIL makes “maximum efforts” to reduce cost and offset the increase, it may have to pass on some increase to the market. The price increase will vary across models.
Meanwhile, a TML spokesperson told Business Standard: “We are considering a price hike across our passenger and electric vehicles in January 2024. The extent of the hike and exact details will be announced in a few weeks.”
More From This Section
Shashank Srivastava, senior executive officer, marketing & sales, MSIL, pointed to volatility in commodity prices. “Steel prices have been firming up since July, and there is also a general inflationary pressure,” he told Business Standard. He further explained that an estimation is made on what has been the overall cost increase, and based on that a decision for a price hike is taken. MSIL had raised prices by 0.8 per cent in April this year.
Based on the inflation and commodity prices outlook, “we intend to take a price increase for our automotive products effective January 2024,” said Nalinikanth Gollagunta, CEO (automotive division), Mahindra and Mahindra. The details will be announced “closer to the time”.
As for Audi India, the ex-showroom prices of their vehicles will increase by up to 2 per cent from January 1. Balbir Singh Dhillon, head of Audi India, said: “Achieving profitability through a sustainable business model remains a critical part of Audi India’s strategy, and we are committed to providing the best to our customers. Due to rising supply-chain-related input and operational costs, we have effected a price correction across our model range, maintaining the brand’s premium price positioning.”
He said the price change aims to ensure sustainable growth for Audi India and its dealer partners, and the company will ensure that the price hike’s impact is as minimal as possible for customers.
Audi India registered an 88 per cent growth and retailed 5,530 units in the first nine months of this year. Of this, the Audi SUV range witnessed a 187 per cent growth in the January-September period. In comparison, the luxury carmaker had sold 4,187 units in the calendar year 2022, up 27 per cent.
Mercedes Benz India, too, reported an 11 per cent jump in sales in the January-September period to 12,768 units in 2023. Top-end vehicles (those above Rs 1.5 crore) account for one-fourth of the company’s overall sales here, and have been growing at 22 per cent.
At the retail end, according to dealers, the overall growth momentum would likely continue in December. “The harvest has been better than last year, and in election-bound states, farmers have more money in hand, thanks to better MSPs for their crops.
Overall, we expect the momentum to continue,” said Manish Raj Singhania, president, Federation of Automobile Dealers’ Associations (FADA). He said discounts, however, continue on models for which dealers have inventory, but SUVs hardly have any discounts.
Overall, we expect the momentum to continue,” said Manish Raj Singhania, president, Federation of Automobile Dealers’ Associations (FADA). He said discounts, however, continue on models for which dealers have inventory, but SUVs hardly have any discounts.
Srivastava felt that with the impending price hike in January, some customers may advance their buying decisions to December.
In an October report, Axis Securities analysts noted that they expected auto original equipment makers (OEMs) and ancillaries to have witnessed an improvement in gross margins in the September quarter of FY24 as the incremental benefit of commodity prices continued in Q2FY24. “In Q2FY24, steel HRC prices were corrected by 4 per cent quarter-on-quarter (QoQ), while platinum/aluminum/copper/zinc declined by 9 per cent/5 per cent/1 per cent/5 per cent/1 per cent on a QoQ basis,” the report noted.
“The commodity tailwind for the auto sector is likely to diminish QoQ in H2FY24, but we don’t foresee the high commodity inflation that prevailed during the last year. Overall, the commodity complex is likely to be benign in H2FY24,” it said.