Car buyers are entering the financial year with trepidation as almost every major carmaker in the country has further revised the prices, months after hiking the prices in January. While a price hike at the start of the year is a customary practice, often to boost year-end sales, a variety of factors have forced carmakers to hike prices at a time when sales appear to be declining.
Causes behind the price hike
The price hike has been announced primarily in response to an increase in component costs and operational costs along with the weakening of the Indian rupee against the US dollar, which has made imported components more expensive. Raw material costs have also gone up significantly for key materials such as steel, aluminium – which has witnessed a 10.6% year-on-year increase in costs – and rubber, which has witnessed a staggering 27% year-on-year increase. Furthermore, an increase in energy, transportation and logistics cost is said to factor-in to the price hike, according to experts. In addition to this, OEMs like BMW and Hyundai, among others importing CKD (Completely Knocked Down) and CBU models are also witnessing a price hike.
The tariffs imposed by US President Donald Trump, while not directly affecting Indian automakers (whose exports to the US remain low) has caused global supply chain disruptions as component manufacturers are scrambling to re-strategise and expand into territories like China, South Korea and Japan among others. The supply chain disruptions, in addition to currency fluctuations and component price hikes have led to a rise in input costs, putting pressure on already beleaguered manufacturers. At a time when demand is slowing down significantly, carmakers simply cannot afford to absorb the rising costs, as they had been doing in the past. At the same time, brands are clearly conscious of capping the price hike to manageable levels, in order to not further deter customers, and dampen demand.
Car brands that have announced a price hike:
| Car Brand | Price Hike |
|---|---|
| Maruti Suzuki | Up to 4% |
| Tata Motors | Up to 3% |
| Mahindra | Up to 3% |
| Kia | Up to 3% |
| Skoda | Up to 3% |
| MG Motor | Up to 2% |
| Stellantis (Jeep + Citroën) | Up to 2% |
| Mercedes-Benz | Up to 3% |
| BMW | Up to 3% |
| Hyundai | Up to 3% |
| Audi | Up to 3% |
| Honda Cars | Unspecified; varying increases yet to be announced |
Silver lining for consumers: Cash discounts on entry-level cars
The price hike comes-in at a time when the entry-level car segment is witnessing record contraction in sales. According to a report by the Federation of Automobile Dealers Associations (FADA), the passenger vehicle segment registered a year-on-year decline of 7.8%, with the rural market being more severely affected as inflation has dulled consumer sentiment. As a result, dealers are keen on clearing their inventories, and are offering significant discounts including cash offers, exchange bonuses, corporate incentives (with additional scrappage bonuses for customers holding valid certificates).
For instance, the Maruti Suzuki Alto K10, Maruti Suzuki S-Presso and the Maruti Suzuki Celerio are all eligible for cash discounts up to Rs 40,000. Other ailing brands like Citroen are also offering significant discounts on cars like the C3, are also witnessing low EMI rates. However, many of these offers have expired as of yesterday, with dealerships expected to offer even higher incentives and discounts as they enter the new financial year with stagnating inventories. Negotiating with dealers for MY24 models can yield further discounts. According to a car dealer of a popular mass market brand, discounts can range from Rs 2500 to Rs 75,000 depending on the model.
Although the discounts vary across models, brands and dealers, the top brands whose dealers are offering discounts include Maruti Suzuki, which has the largest model line-up on discount, ranging from the S-Presso to the more premium Baleno, Honda, which is offering discounts on models like the City (with benefits up to Rs 73,000) and the Elevate, both of which are witnessing a decline in sales.
Even brands like Mahindra, which has bucked the trend with strong demand for the Thar Roxx is offering dealer discounts in the form of exchange offers, and other benefits (up to Rs 3 lakh) for FY2024 models. These discounts, along with the recent restructuring of income tax brackets, are expected to breathe some life back into India’s ailing entry-level car market.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
