Another car price on cards, two wheelers safe

With automakers reeling under input cost pressures due to the falling rupee, car prices are set to go up in June. While Toyota Kirloskar Motor and General Motors India are working on the quantum of price hikes, others such as Maruti Suzuki and Hyundai Motor are expected to follow suit. The move is expected to further dampen car demand as the industry is already suffering from high interest rates and record fuel prices. However, two-wheeler makers such as Hero MotoCorp and TVS Motor said they have not taken any decision on raising prices due to the rupee’s fall as virtually every component is sourced locally. Car prices have risen by up to nine per cent in two years. This would be the seventh hike by automakers in two years; and third in 2012 after prices were revised upwards in January on the back of high commodity prices and in March after the two per cent hike in excise duty. Between January and April, 805,632 cars were sold, a growth of 11 per cent over 724,660 cars sold in year ago period. Car sales were not impacted by price hikes in January and grew 7 per cent at 196,013 cars compared with the year-ago period. This followed December 2011’s sale of 159,325 units and November 2011’s figure of 171,131 cars. India recorded its best ever car sales in February at 211,402 cars and beat the record at 229,866 cars in March with customers rushing to showrooms to avoid anticipated price hike in the Union budget. Entry-level segment comprising Nano, Alto and Eon along with diesel cars such as Swift, Dzire and i20 spruced up sales of the industry while sedans and SUVs continued decent growth. Due to a 2 per cent excise duty hike in small cars and 2 to 5 per cent excise duty hike in bigger cars, the industry was severely impacted with overall sales falling to 168,351 cars in April, growing just 3 per cent over the year-ago period. This followed a 20 per cent growth in March. The Rs 2-4 lakh small car segment was hit the most while diesel sedans such as Verna and Dzire spruced up sales. Sales of high-end sedans such as Superb, Cruze, Kizashi and Passat also bore the brunt of the price hike. “We are looking at a price hike next month as rupee depreciation has impacted us heavily. We will be taking a decision on it soon,” said Sandeep Singh, deputy MD (marketing), Toyota Kirloskar Motor. “The rupee fall is impacting our bottom line as up to 30 per cent of components are imported,” said P Balendran, VP, General Motors India. Both companies are expected to take a decision later this month on the quantum of price hikes. While Maruti Suzuki had raised car prices by 1.5 to 3 per cent in January, Toyota had increased prices of its vehicles, including that of its largest selling SUV Fortuner, by up to Rs 50,000. GM India had increased prices of popular cars such as Beat (diesel) by Rs 15,000 citing higher input costs. Over and above the across-the-board hike, Maruti had raised prices of Dzire sedan once again by up to Rs 15,000 earlier this month and the company may bite the bullet again next month. “Rupee depreciation is creating pressure on margins and input costs. However, market situation is really tough and price hike looks like a difficult thing at the moment,” a senior Maruti Suzuki official said. The carmaker imports roughly 10 per cent of its raw materials from countries such as Japan and South Korea. R Sethuraman, VP (finance) at Hyundai Motor India said, “There is pressure on input costs. Definitely, the pressure is a reason for concern.” Honda Siel Cars India has not yet planned any price hike, Jnaneswar Sen, senior vice president for marketing and sales at the company said. Most of the carmakers apart from Honda and Tata Motors had raised vehicle prices by two to three per cent across the entire portfolio in January 2012. “Costs to automakers would have gone up due to the rupee fall. The petrol price hike by a significant amount has already dampened the sentiment and vehicle price hike will further be a negative for the industry on demand front,” said Yaresh Kothari, auto analyst, Angel Broking. Car sales grew just three per cent in April at 168,351 units compared with 162,813 units in the year-ago period on account of hike in vehicle prices following the Union budget on March 16. The industry body had earlier forecasted 10 to 12 per cent growth in car sales for the current financial year after a flat 2011-12. Though carmakers and analysts said it would be difficult to quantify the impact of price rise on car sales, going forward, Kothari of Angel Broking feels that it is unlikely that auto industry would meet the growth forecast of 10 to 12 per cent in 2012-13.