The automobile manufacturers are all set to increase up to 3 percent in the prices of their vehicles. Almost all existing passenger cars will have higher price in the beginning of the next year. The argument put forward by the car makers is the depreciation in the value of rupee. Another reason emerged is the increasing cost of raw material and spare parts. However, the car makers expect that the sales figure to go up as the customers will take advantage of the existing price.
"Just because food prices go up, doesn't mean people stop eating," says Popular Vehicles managing director John K Paul, applying the analogy to passenger cars. "Yes, there has been a sales slowdown, and the entire industry is also witnessing a production shortfall, thanks to import costs driven by a depreciating rupee. However, there is pent-up demand (from previous months) which will manifest itself before the price rise takes effect next January."
For cars in the B+, C and D segments, urban customer's purchasing decision will be influenced by factors like fuel inflation by 15.5 per cent and high input costs. Lower sales caused by simultaneous release of car models and anti-inflationary measures of the Reserve Bank of India have also affected the automotive industry. Majority of the cars are manufactured using imported parts and even the steel used is sourced from Japan and Germany. As per records, around 70 per cent engine components come as CKDUs (completely knocked down units).
Toyota has already made many hikes in the price of its vehicle in the moth of January, April, July and October. If there are no more setbacks, the car sales would be increased in the month of December according to Prijath Babu of Valorien Consulting. The car makers expect that the sales of diesel cars to increase and hence, some companies might try to reap more profit by hiking the prices.
To counter new import duties, most car makers would surely increase the price of their vehicles in the month of January itself. A Maruti Suzuki spokesman said that the company was keeping an eye on the exchange rates. "We have a good import component in our manufacturing and this was beginning to hurt. Hence, the decision to hike prices in January, after last month's hike of Rs 10,000 on diesel cars. Most car companies with higher import component ratios will be impacted by rupee depreciation," the spokesman said.
The record fall of rupee to 54 against dollar is the main reason for the price hike of passenger cars. Since August, the rupee has been in the down side by 17 percent. Due to the currency depreciation along with rising prices of furnace oil, metal, aviation turbine fuel, naptha and bitumen in the international level, the rupee price of oil has increased up to 40 percent. To attract customers, many car makers are offering discounts this month.
Toyota Kirloskar Motor, the renowned car maker provided Rs 35,000-45,000 discount on its Etios and Lava. Most companies are also in the process of opening new showrooms and outlets to expand the business in India. By the end of 2012, Toyota Kirloskar Motor will be opening 3-5 new outlets in the rural areas. Maruti Suzuki India Limited (MSIL) has similar plans to base its new showrooms in towns, including Kerala, which will have the population of over 50,000 people by the end of 2015.
With the lucrative offers given by companies, many are hopeful of better sales in the last month of 2011.
