NEW DELHI: From January 2021, cars, two-wheelers, and other categories of automobiles will become more expensive with automakers having decided to pass on rising input costs to the end consumer. Analysts note that the decision comes even as demand has taken a beating, and that while OEMs opt for a price hike of between 1-3 per cent every year, the impact is expected to be significantly higher this time around.
Automobile prices had already seen a sharp increase this April due to the transition to BS-VI emission standard and a further price hike will likely sour already weak demand, experts add. Fitch Ratings, for instance, said that automakers’ plans to pass on higher commodity prices to customers will dim the prospects for a demand recovery after December—once pent-up demand and the festive boost fade away.
Even as demand has witnessed a V-shaped recovery over the past few months, domestic auto sales for the April-November period remains 26 per cent lower than the previous year. Passenger vehicle sales are down 22 per cent while two-wheeler sales are down by 25 per cent. “Q4FY21 is expected to witness lower demand for passenger vehicles sequentially as the pent up demand and festivities would end.
Also, January 2021 onwards, OEMs are expected to hike prices for their models, to offset the rise in the input and commodity prices, which could negatively impact consumer demand,” said Care Ratings in a recent note. Two-wheeler maker Hero MotorCorp had said on Wednesday that due to the rise in input costs, it would increase prices by up to Rs 1,500 from January 1, 2021. Kia Motors India, Hyundai India, Maruti Suzuki, and Mahindra & Mahindra have also announced price hikes beginning January 2021.
Cost of automobile ownership soaring
The past year has seen a sharp increase in the cost of ownership of automobiles with several changes resulting in a rise in vehicles prices. Not least of these changes was a hike in insurance premiums, a price increase driven by BS-VI upgradations, and the steady upward trajectory shown by domestic fuel prices.