After mobile-phone service providers, India’s passenger-car makers are also mulling price increases as the long-drawn-out consumption slump and inventory pile-ups have taken a heavy toll. They also have to brace for more stringent emissions norms and the impending cost of transition to electric mobility.
The country’s largest carmaker Maruti Suzuki India Limited on Tuesday said it would increase the prices of its vehicles from January to offset rising input costs. The Suzuki Motor Corporation unit sells one out of every two cars in the Indian market.
All through the year, it has had to reduce or even halt production, as dealers were to take on more inventory. They in turn were sitting on a pile of unsold stock as people put off discretionary purchases because of the economic slowdown and job losses. Maruti Suzuki registered a 25% drop in cumulative sales volume at the end of second quarter of the fiscal year in September.
Other car manufacturers such as Toyota, Mahindra & Mahindra and Mercedes-Benz said they were also contemplating a similar move. Hyundai Motor India and Honda Cars India have said they will not increase vehicle prices in January, but their products will see a rise in prices when models catering to more stringent emissions norms (Bharat Stage-VI) are introduced in the market in April.
In a regulatory filing, Maruti Suzuki said that over the past year the cost of the company’s vehicles had been impacted adversely by increases in various input costs. “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 2020,” it said.
The company clarified that the price increases would vary for different models. Currently, the company sells a range of vehicles starting from the entry-level small car Alto to premium multipurpose vehicle XL6 with price ranging from 289,000 to 1.1 million rupees (US$4,030-$14,300). Interestingly, in September the carmaker had lowered prices of select models to pass on the government’s reduction in the corporate tax.
Toyota Kirloskar Motor officials said they were working out details to offset rising input costs by passing them on to customers as well. When stringent emissions regulations kick in, the prices will be revisited, they said.
Sport-utility-vehicle maker Mahindra & Mahindra has also said it is reviewing the prices of its vehicles and will make an announcement at the end of this month. A price rise is expected in early January. German luxury-car maker Mercedes-Benz also said the company was mulling a similar price increase and was reviewing costs.
Industry experts believe the slowdown in the Indian auto sector will continue as the country’s overall economic growth remains sluggish. In addition, the new emissions norms, scheduled to be implemented from April 1, 2020, will increase production costs by 10-15% as significant changes to vehicle platforms and components will be needed.
Moreover, with demands for greener energy rising, automakers are accelerating investments in clean-energy vehicles, new technology, and mobility trends. This has put pressure on cash flow and profitability of the auto manufacturers in the country.