NEW DELHI: Amid slowdown in demand for new cars and steep discounts, the talk of a price hike by car companies in the new year has surprised other industry stakeholders as dealers grapple with large inventory.
Announcements regarding price hikes towards the end of the year have become almost an annual ritual as companies resort to desperate measures to clear piled-up inventory because unsold vehicles will need to be liquidated with heavy discounts if they flow into the new year. Often, the price increase “considered” by companies does not translate into a hike in Jan.
So far, the call for price hikes – of around 3% – has already come from companies ranging from Maruti Suzuki, Hyundai, Mahindra & Mahindra, JSW MG Motor, Audi, and Mercedes-Benz. Ironically, many of them are already throwing in steep discounts to lure buyers. The discounts run from a few thousand of rupees for small cars, to much higher for bigger SUVs and sedans, and lakhs for the luxury brands.
Justifying the prices hikes, M&M (like other companies) blamed inflation and increased commodity prices.
Industry officials, however, say that this smacks of a “desperate attempt to lure buyers” as carmakers try to clear pending inventory before the new year.
“This conversation is more of a marketing trick to get people to the showrooms, especially with footfalls being low post the festive period. Companies want to clear current-year inventory before the new year begins and thus talk about price hikes. The fact is that price hikes may not happen across all the models, and many a times can only be on select variants,” an industry official told TOI.
C S Vigneshwar, president of the Federation of Automobile Dealers Associations (FADA), said the practice of calling out price hikes when there is already heavy inventory at the retail level is not healthy. “Last month, there was an inventory of 75 days at the dealerships, and we are now calculating the levels for this month.”
Vigneshwar said companies should not “flood” dealerships with new stocks when the past stock is already more than required. “Stop sending us these many new vehicles, and temper down a bit.”
Ravi Bhatia, president of analytics firm JATO Dynamics, said that significant discounts on models like the Mahindra XUV4OO, JSW MG Gloster, and VW Tiguan highlight the efforts of automakers to drive year-end sales and clear inventory.
“Maruti’s consideration of a price hike in Jan may face challenges in this competitive landscape, where rivals are leveraging aggressive incentives. Balancing profitability with consumer sentiment will be critical for Maruti to sustain its leadership in this price-sensitive market,” Bhatia said.
