Planning to buy a car? Prices to rise by up to 4 percent from April | READ

Cars are going to become pricier from April as several auto companies such as market leaders Maruti Suzuki, Mahindra & Mahindra, and Hyundai have announced price increases to meet the rising cost of inputs and operational costs. Maruti Suzuki India, the market leader in the domestic passenger car market, is to increase prices of its entire model range by up to 4 per cent from next month. The automobile behemoth presently retails a mix of models from the lowest-price Alto K-10 to multiple-use car Invicto in the domestic segment, at a price between Rs 4.23 lakh and Rs 29.22 lakh, respectively (ex-showroom Delhi).

 vehicle prices to rise from next month

Rival Hyundai Motor India stated it will hike auto prices up to 3 per cent from April 2025 due to growing raw material and operational expenses. In a similar vein, Tata Motors plans to hike the price of its passenger vehicle lineup, including electric cars, from April 2025, for the second time in this year. Mahindra & Mahindra announced it will raise prices of its sport utility vehicles  and commercial vehicles by a maximum of 3 per cent from April. Kia India, Honda Cars India, Renault India and BMW too have announced to raise vehicle prices from next month.

Reason behind the magnitude of hike

Deloitte Partner & Automotive Sector Head Rajat Mahajan informed a media agency that automobile manufacturers typically have two rounds of price increases in India, one at the start of the calendar year and one at the onset of the financial year. "The reason behind the magnitude of hike is different, may be due to currency movements where we require more rupees to import the same commodity or product," he said.

Price elasticity is not very high in premium segments

Over the last six months, there has been a strengthening of the US Dollar against the rupee by almost 3%, which affects import-oriented sectors, that can directly or indirectly affect the input costs. Original equipment manufacturers using a complete knockdown (CKD) model are also likely to feel the impact even more strongly."Other factors appear to be lukewarm demand for low-end vehicles, particularly from first-time buyers and rural customers, which is compressing margins. Price elasticity is not very high in premium segments and any price hike will increase margins," Mahajan said.

Reasons for such frequent hikes

 Also, the volume of features that are being added in the cars is also one of the reasons for such frequent hikes that are witnessed over the past few quarters, he said. "Concurrently, OEMs realize that there is high price sensitivity in the lower segments. Therefore, are most likely to exercise restraint in implementing these increases as the segment could experience a bounce, particularly following the recent budget that left more funds in the pockets of the consumer," he said.

Recent price increases by different automobile manufacturers

Icra Corporate Ratings Vice President and Sector Head Rohan Kanwar Gupta maintained that the price increases are typically absorbed at the beginning of the calendar/fiscal year to offset items such as hikes in operational expenses due to inflationary factors and commodity prices, among others. "The recent price increases by different automobile manufacturers are for the same reasons," he added.

Healthy discounts being offered across a range of models

Though the price increases may somewhat temper the demand sentiments, it should be pointed out that there already are healthy discounts being offered across a range of models in the passenger vehicle segment, and the industry is working to reduce inventory levels, Gupta said. Correspondingly, the effect on demand of such price increases is likely to be limited, he added.