The Indian auto industry has never had it so good. Demand for passenger vehicles has been steadily increasing and shows no signs of slowing down. And after the challenges of years of Covid, the turnaround has been quite spectacular. But what is even more spectacular is that demand remains strong despite repeated price hikes by manufacturers. New cars are now more expensive than ever, but should OEMs take positive customer buying sentiment for granted? can they And for how long?
Over the past year, nearly every automaker in the country has announced at least one price hike. Some of them, multiple excursions. And this is across segments, be it luxury or mass market. Experts maintain that while price increases or hikes may not deter buyers from the luxury car space, it could eventually deter customers looking for options in the mass-market segment, especially those looking for options entry level.
Gurugram-based IT professional Sanjay Arora booked a hatchback from a well-known brand in November. When he took delivery of the car, intended as a graduation present for his daughter, in January, he was paying ₹12,000 extra. “The extra I paid may seem insignificant considering the overall price of the vehicle, but somewhere, it makes a difference. Also because cars these days take months to be delivered anyway,” says the 55-year-old years.
Manufacturers choose to blame factors such as inflationary pressures and rising input costs. Every manufacturer in every price hike announcement also claims that they have no choice but to pass some of the cost on to the end customer. On Wednesday, RBI also raised the key policy rate by 25 basis points to 6.50 percent, a new pain point for auto customers. “With this hike, RBI has made the sixth rate hike since May 22 and the total hike now stands at 2.1%. This RBI decision will have a knock-on effect on the passenger car segment price-sensitive and in the entry-level two-wheeler segment which is already reeling under pressure due to regular price hikes,” says Manish Raj Singhania, president, Automobile Dealers Federation. Associations of India. “On top of that, the fare hike will lead to an increase in EMI payments which will increase the operational cost.”
With rising prices and rising EMI payments now, there is a subtle word of caution in the Indian auto industry, which otherwise predicts a strong 2023 after a largely impressive 2022 .
Date of first publication: February 9, 2023, 1:05 PM IST
