Auto dealers warn price hike could hit GST-led sales boom

Fada president Sai Giridhar said consumer offers could partly offset higher vehicle prices, but affordability remains crucial for sustaining demand.

Automobile dealers are warning carmakers that price hikes could wipe out the benefit of last year’s goods and services tax (GST) cut, potentially slowing the sales momentum seen across the industry just as it enters the festive season.

Vehicle retail sales rose 20.77% year-on-year to 15.51 million units in the first half of FY27, according to Fada data. (Mint)

Price hikes and potential rate hikes by the Reserve Bank of India will shape the outlook in the coming months, Sai Giridhar, president of the Federation of Automobile Dealers Associations (Fada), told Mint.

Dealers flag price hikes as key risk to auto sales

“The silver lining out here is that, apart from the price hikes, there are consumer offer schemes. Because in the last year, when there were price reductions, the consumer offers were practically eroded,” Giridhar said.

The entire ecosystem is built around keeping prices affordable. If consumers perceive affordability slipping, the industry will feel the impact, he added.

Giridhar’s comments come after a warning by the largest dealers’ grouping in its monthly sales note about price hikes. Fada wrote in its 6 October note that one year on from GST 2.0, affordability remains the single engine of this cycle, and dealers now flag further price increases eroding that very affordability as their foremost risk for the quarter ahead. “Protecting the GST gain is, to our mind, the key to converting the festive season into durable growth.”

Analysts warn of pressure from weaker rural demand

Even analysts have begun to caution about the potential impact of price hikes. “The key downside risks (to sales) are moderation in rural demand, as certain states are logging a rainfall deficit, and demand impact due to price increases that are being implemented across categories,” analysts at Nuvama Institutional Equities wrote in a 9 September note.

The note of caution follows a period of robust sales since the start of FY27. Fada data released on 6 October showed vehicle retail sales in the first half of FY27 rose 20.77% year-on-year to 15.51 million units. Passenger vehicle sales rose 24.48% to 2.54 million units, while two-wheeler sales grew 20.43% to 11.04 million. Commercial vehicle sales increased 21.48% to 585,217 units.

Major carmakers raise prices repeatedly this year

Carmakers have raised prices multiple times this year amid sustained cost pressures. Maruti Suzuki India Ltd has increased prices three times, in June and August by up to ₹30,000 each time, followed by a hike of up to ₹20,000 on select models in September.

Hyundai Motor India Ltd raised prices thrice, by about 0.6% in January, up to ₹12,800 from June and up to 1% from September. Tata Motors Passenger Vehicles Ltd also raised prices thrice, by a weighted average 0.5% for internal combustion engine (ICE) models in April, up to 1.5% across its portfolio in July and by up to ₹25,000 in September.

Mahindra & Mahindra Ltd raised prices by up to 2.5% in April and by an average 2.7% for sports utility vehicles (SUVs) in July. Two-wheeler makers have also raised prices this year. Hero MotoCorp Ltd has implemented a cumulative blended average price hike of about 4.5% across its ICE portfolio since late February. The managements of TVS Motor Co. Ltd and Bajaj Auto Ltd have also noted that the companies undertook price hikes in FY27.

During a press conference in September, Tata Motors PV managing director and chief executive Shailesh Chandra said that only a limited part of the cost increase has been passed on to consumers so far, with more hikes likely over the next few months to offset the impact triggered by the West Asia war, which continues to affect supply chains and logistics costs across the world.