With sustained high inflation and input costs, automakers need help balancing affordability versus profitability. Hyundai India recently hiked prices across models owing to rising overheads. However, flagship models like the Creta SUV and the Verna sedan form a price-sensitive mainstream segment. This article covers the ongoing cost implications for Hyundai and whether further price hikes make sense for mass-favourites Creta and Verna without diluting their market standing.
As Hyundai’s highest-selling models, both the Creta SUV and Verna sedan exemplify an ideal alignment of practicality, features, and conspicuous styling at accessible pricing points. With over 3 lakh cumulative sales each as of early 2023, what drives their appeal amongst vehicle buyers amid fierce competition?
● Balanced Feature Sets: Packages blend essential and standout equipment like sunroofs, connected tech, ventilated seats, multiple airbags, wireless charging, etc, at reasonable price points without unnecessary frills.
● Distinctive Designs: Sculpted exteriors sporting signature Hyundai cues project elite styling reflecting the aspirations of younger emerging professionals.
● Assured Ownership Experience: Hyundai’s extensive service network, reliability and cost of maintenance conveys confidence. High resale value promises buyers peace of mind.
● Simplified Selection: Extensive variant spread allows customers to identify ideal feature configurations and powertrains matching specific budgets and usage needs conveniently.
In essence, both Creta and Verna democratise premium features within accessible large-volume segments, promoting Hyundai to market leadership positions through elegant packaging distilled for India. Now, inflation necessitates examining their cost escalations.
Multiple underlying factors connected to global events continue to impact costs associated with developing and manufacturing automobiles in India:
1. Spikes in steel, aluminium, and plastics due to supply chain disruptions
2. Crude oil price hikes cascading into inflated rubber and transport overheads
1. Increased electricity, water, and property costs from multi-year high inflation
2. Rising human resources expenses - salaries and minimum wages
1. Unfavorable currency exchange rates affecting profit repatriation on exports
2. Increased compliance costs for exports like Euro NCAP standards
1. Significant investments are needed toward connected technologies and EVs
2. Additional developmental costs and overheads
While clauses exist for passing on a portion of input cost rises to consumers through price increases, excess hikes risk diluting carefully cultivated brand positioning for models like Creta and Verna. So, what avenues exist for optimising costs?
As a leading global automaker, Hyundai can leverage various strategic and operational levers to optimise overall expenditures and offset external cost escalations beyond passing Limited risks to end consumers:
1. Increasing components, aggregates, and electronics sourced through domestic vendors to improve localisation and minimise import duties
2. Part sharing across models like Creta and Verna wherever feasible to derive
1. Higher export volumes across global markets provide economies of scale
2. Design optimisation and value engineering initiatives to minimise material costs
3. Higher output of manual transmission variants over pricier automatics
However, excessive cost minimisation through imprudent rationalisation risks undermining model capabilities, thereby market positioning - necessitating a balanced approach. With costs showing few signs of abating in the near future, could incremental price increases make sense?
Despite initiatives reducing operational costs, sustained high inflation continues to necessitate recurring changes. As price-elastic mainstream models, the Hyundai Verna price and Creta have limited headroom for successive customer price hikes without market contraction risks. However, measured selective increments present a low risk of dilution of brand heritage based on the following market indicators:
1. Broad indication across auto segments that customers accept the need of brands to hike prices moderately, matching input cost rises
2. Early signs of post-pandemic demand resurgence provide a cushion for incremental price hikes without significant growth impacts
1. Strong brand equity and customer pull for Creta and Verna persisting through earlier price increments, signalling acceptability
2. Perception of added features and technologies improving variants sustains incremental premiums
1. Leadership within respective categories signals pricing power relative to competition
2. Reduced discounting can partially compensate for price hikes, preserving dealer and channel margins
Thus, while multiple factors permit further incremental price increases to restore net margins for Hyundai Creta on road price and Verna, overly frequent hikes risk diluting the value positioning Hyundai cultivated for mainstream models. Let us summarise approaches in the future.
As Hyundai India steers its growth-driving models like Creta and Verna within highly inflationary business landscapes, balancing affordability and profitability requires multi-mode strategies:
● Mitigate rising overheads through operational excellence in manufacturing, exports, and localisation
● Judiciously pass selective portions of escalated costs via infrequent price hikes supporting dealer health
● Launch improved variants with perceptual premium features, enabling customers to absorb minor incremental pricing
● Preserve value-centred brand equity by limiting price increases only to essential levels reflecting input costs
In essence, Hyundai will rely on its competitiveness, supply-chain capabilities, and clarity, aligning pricing to improvements for optimising affordability amidst persisting inflationary headwinds - while sustaining Creta and Verna’s appeal and sales traction.
Hyundai faces difficult decisions balancing affordability and profitability for mainstream models like Creta and Verna amidst rising costs. Hyundai can deliver appealing value without excessive compromise through prudent operational optimisation, plus gradual price increases and syncing improvements to limit brand equity impacts. The aim is to preserve sales momentum while rationalising margins via multifaceted inflation mitigation strategies prioritising customer sentiment.
Disclaimer: This content is part of a marketing initiative. No TNIE Group journalists were involved in the creation of this content.