Potential car buyers celebrating price cuts after the government slashed central value added tax four percentage points last week may be in for a jolt.
Car makers said they are planning to raise prices 2 to 3 per cent in January, almost neutralising the December cuts. The move is being considered primarily to improve margins and, in for cars with high import content, to cover the cost of a weakening rupee against the dollar.
Some analysts, however, suggest that car-makers threaten price rises every January in a bid to clear calendar year-end inventory. “There is always a threat from auto companies, usually in January, on a price increase in an attempt by them to clear the inventory. Sometimes, the ploy is never exercised,” said Mahatesh Sabarad, a Mumbai-based analyst with Centrum Broking.
The bid to clear December inventory may have grown urgent given the significant slowdown in sales.
THE PRICE DRIVE
Company Price fall (Rs)
Sales in Nov (%)
Maruti Suzuki 6,500-23,000 -26.90
Hyundai Motors 8,834-44,792 -23.30
Tata Motors 12,000-36000 -12.00
Honda Siel 19,000-31,000 -15.00
Toyota Kirloskar 23,980-121,330 -48.00
SkodaAuto 12,500-51,000 -46.21
Nevertheless, industry estimates that prices of at least 31 models — from compact cars to premium sedans and sports utility vehicles from Maruti Suzuki, Toyota Kirloskar, Honda Siel Cars, General Motors India (GM) and Ford India — will rise. Hyundai Motor India and Czech car maker Skoda Auto did not cite specifics but said they also reconsider their pricing strategy.
“With increasing input costs, it will be difficult to hold current price levels,” said Mayank Pareek, executive officer (marketing and sales), Maruti Suzuki. The company has already raised prices twice this year
Chevrolet, the brand through which troubled US auto giant General Motors operates in India, said it will raise prices Rs 7,000 to Rs 57,000 across models. Most car makers say their decisions are driven by the weaker rupee.
For instance, Honda Siel Cars India (HSCI) plans to raise prices of models like City, Civic, CR-V and Accord significantly. Up to 75 per cent of components for the Accord premium sedan and about 50 per cent for other models are imported.
“There has been an unprecedented fluctuation in the value of the rupee which has forced us to raise prices. We will consider a price hike for car models later on, but at the moment the price of the CRV sports utility vehicle will be raised by Rs 1 lakh in January, said Jnaneswar Sen, senior vice-president (marketing) of Honda Siel.
The weaker rupee is also likely to see prices of Toyota models like the Corolla Altis, Innova, Camry and Prado go up between Rs 20,000 and Rs 30,000.
“Since we are importing our engines and transmission, we have been facing cost pressure. The new Corolla Altis has an import content of about 60 per cent and the Innova about 50 per cent,” said Sandeep Singh, deputy managing director (sales and marketing), Toyota Kirloskar Motors.