Car makers in the country are finding it difficult to maintain their profit margin due to the increased import costs due to devaluation of rupee and discounts offered on petrol cars following hike in petrol price. In order to make up for the impending losses, the companies are planning to raise the price of diesel variants.
An announcement has been already made by Toyota to increase the price of its diesel variants by 1 to 2 percent starting from 1st June. Other car makers are also expected to follow Toyota. Since January, this will be the third price hike in the country.
Deputy Managing Director, Marketing, Toyota Kirloskar Motors, Sandeep Singh, said, "There is tremendous pressure on auto companies and a price hike is certain. The one-two per cent hike will be effective from June. However, we have not decided the exact amount by which prices will be raised across models." He further clarified, "There are rising input costs and then the depreciating rupee also adds to import bills for parts being sourced from abroad. Auto firms can't absorb cost beyond a point." Singh provided indication that prices of diesel variants will be increased more than the petrol models. Even the petrol models, which have decent sales will carry high price tag.
Starting from June, car makers such as Hyundai Motors, Maruti Suzuki and General Motors are also expected to increase the price of their model. A clear hint from the car makers have been received in this regard. However, these companies are biding their time to watch the market trend before raising the prices, so that their sales volume is not hampered. Car makers are facing a Catch-22 situation as the customers are not showing immediate interest to buy vehicles after the massive hike in the petrol price.
Vice President, Corporate Affairs, General Motors, P. Balendran, said, "The hike is on the cards as rupee depreciation is taking toll on our margins.” He indicated that there may be no price hike in June as the company is keeping a close watch on the market and wants the condition to improve
Depending on the demand for the models, most of the companies are offering discounts and freebies on the petrol models ranging between Rs. 3,000 and Rs. 50,000. To make up for the hike in excise duty proposed in the Union Budget, there was a 1.5-3 per cent hike in the car prices in the month of January, followed by a second hike of 2-5 per cent.
Owner of a General Motors showroom in South Delhi expressed, "Another round of price hike is not going to help the sector in any way. Petrol car sales are at an all-time low and only diesel models are bringing in revenue. Any further price hike will dent the prospect of sale of diesel vehicles as well."
The industry will find it difficult to achieve their sales target of 10-12 per cent after the recent hike in petrol price and the proposed rise in the price of diesel vehicles. Industry experts feel that sales opportunities and the market condition may not favour the companies if they raise the price for third time. Auto analyst, Angel Broking, Yaresh Kothari, said, "The significant hike in petrol price has already dampened the sentiment and increasing prices of vehicles will hit demand."
