A second consecutive annual decline in car sales in 2013-14 has forced almost all car companies to defer price increases in April.
Traditionally, car makers hike prices by 1-3% at the start of the financial year to provide a cushion to their margins. Last month, a host of manufacturers including Maruti, Hyundai, Mahindra, Tata Motors and Renault had said they would increase prices shortly. However, barring Honda Cars India, which has raised prices of its recent launch City, no other company has increased prices.
“There are cost pressures but the industry is not in a position to increase prices due to the dampened demand in the market.,” said Vishnu Mathur, director-general, Society of Indian Automobile Manufacturers (SIAM). “Last year was the toughest for the industry and nobody knew whether there would be growth or not. We started out last fiscal with a growth projection of 3-5% on the back of poor sales in 2012-13 and ended up with a 6% decline. It is that uncertain.”
Market leader Maruti Suzuki, Hyundai Motor India, Toyota India and Mahindra and Mahindra confirmed to HT that they have not raised prices yet. Firms had reduced prices in mid February after the government slashed excise duties on vehicles.
However, it proved to be a curse in disguise as the industry had to absorb an estimated ` 600 crore in losses due to the inventory of cars produced before budget. The expected bump in demand due to lower prices has not happened yet.