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Hero joins the New Year price-hike bandwagon 

Auto firms set to increase prices to offset inflation blues, costs incurred by BS-VI transformation; analysts say demand will be hit

Published: 10th December 2019 11:54 AM  |   Last Updated: 10th December 2019 11:54 AM   |  A+A-

Employees work on an assembly line of Hero Motocorp during a media tour to the newly opened plant in Neemrana, in the desert Indian state of Rajasthan. (File Photo | Reuters)

Express News Service

After a number of carmakers announced they would increase prices of their vehicle models from January 1 next year, India’s largest two-wheeler maker Hero Motocorp on Monday became the first Original Equipment Manufacturer (OEM) in the segment set for a hike.

In a statement, Hero said it will increase the price across its range of two-wheelers by up to Rs 2,000, although the exact quantum of the increase will vary on the basis of the model and the specific market.

Analysts say the price hike, which this time is going to be much steeper, will impact demand as market sentiment continues to remain on the downside. “Indian consumers are price sensitive. Whenever there is a price hike, we have seen demand getting impacted,” Puneet Gupta, associate director, IHS Markit, told this publication.

“This time, the impact will be bigger. OEMs are not only going for a price hike because of inflation but are also compensating the cost they made for BS-VI transformation. They are taking a dual hit; that too, at a time when the industry is going through a slowdown,” he said. 

India’s automotive sector in going through one of its worst slowdowns ever. In the first half of FY20, overall vehicle sales fell by 17.08 per cent at 11,736,976 units, against 14,154,463 units a year ago. Last week, India’s two leading automakers — Maruti Suzuki (MSIL) and Tata Motors — announced a price hike.

“The cost of the company’s vehicles has been impacted adversely due to increase in various input costs. Hence, it has become imperative for the company to pass on some impact of the above additional cost to customers through a price increase across various models in January 2020. This price increase shall vary for different models,” MSIL said in a BSE filing.

Tata Motors also made a similar announcement. “Owing to twin effects of increased commodity prices and the transition into BS-VI, we are compelled to implement a higher price hike across our passenger vehicle portfolio, effective from first week of January 2020,” said Mayank Pareek, president (PV business), Tata Motors.

The hike, according to Pareek, would be on a higher side as compared to earlier price revisions by the company. Normally, if any change happens, prices go up by Rs 10,000-15,000.

Reports said that other OEMs such as M&M and Mercedes-Benz are contemplating a similar move, while Hyundai and Honda Cars will go for a hike when BS-VI compliant models are introduced in the market. BS-VI emission norms are slated to kick in from April 1.



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