Auto cos fear low sales, withhold price hike

The high inflation leading to higher input costs has not influenced the auto industry to increase the price of their respective cars in India. The slow economic growth, high lending rates and outrageous fuel prices have stalled car industry growth considerably. The car makers fear that any further increase on the cars will negatively affect the sales growth leaving their inventories at their sales outlets to stale. Speaking on behalf of Tata Motors, a senior official had informed that this is the time, when ideally a car manufacturer has to offer lucrative discounts to flare up the sales. After the offset of the festive season, the car manufacturers usually undergo a harrowing experience with declining sales.

Meanwhile, the input costs are climbing up by each passing day with increasing commodity prices like steel and rubber. But, the only reason holding the car manufacturers from hiking their inventory prices is that any further increase might halt the sales completely. On the other hand, Mahindra & Mahindra is the only automobile manufacturer who seems unruffled by any flurry of changes taking place in the market. The leading utility manufacturer in the country has revised the cost of its models for the third time in the past eight months with most recent hike of 1.5%-2% in the month of August. But, this decision has not thrown the auto major in gallows. The company has registered a remarkable growth of 32% in the FY2011-2012 at 133,454 units.

Toyota India is the other car manufacturer to increase the prices of Toyota Corolla, Toyota Fortuner and Toyota Innova up to 2% in the month of October covering the three segments – sedan, SUV and MPV, at the same time sustaining the market share with the low-cost models Toyota Etios sedan and Liva hatchback. Except these few companies, rest every firm is holding their desires to increase product cost. However, Tata Motors has decided to avoid further price hike consoling itself with the one-time increase of less than 1% in the month of October.

The consumers wait for the next year for any new purchases, with the anticipation of new cars, moreover to increase the car resale value that declines based on few important factors. The value of a car diminishes depending on the year of registration combined with the year of manufacturing. Society for Indian Automobile Manufacturers (SIAM) had emphasized on the point that despite the festive season, the car sales growth has suffered 24% drop from 181,704 unit sales from last year to 138,521 during the month of October.  Sharing the similar views, P. Balendran of General Motors had asserted that, now that the festival season has passed, they are not anticipating any favorable surprises as the current car market trend will continue to be sluggish until the next budget session.

The only car buyers in the market are the first time buyers attracted by the tempting discounts offered by the auto major as a part of clearance sale. It was expressed that companies are unable to enforce control on the high input costs going into the car manufacturing, but not taking any steps to overcome it by instigating a price hike. The car market is likely to witness a further slowdown in the next three months than at present. Maruti Suzuki India, Hyundai Indian and Honda India cars are the other manufacturers have not indulged in the risk of hiking their car costs. 

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