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With major automobile companies set to increase their vehicle prices from January 1, demand for entry level and low-priced cars is expected to dip further. Original Equipment Manufacturers (OEM), along with automobile dealers, are offering special discounts on the present inventories.
Industry experts suggest that the price hikes will increase the inventories available with the automobile dealers. Passenger vehicle inventories in November were between 61 to 64 days, while it went up to 63 to 66 days in October.
“Demand is under pressure, especially in the passenger vehicles category, where dealers are saddled with inventory on the lower end of the segment. Price hikes may make the situation even more challenging at least in the short term,” said Hemal Thakkar, Director, of CRISIL Market Intelligence and Analytics.
“Price hikes of 1 to 2 per cent will not impact demand as a customer who is fine with buying a car more than ₹10 lakh; for the customer a slight price hike does not impact demand. However, in low-end price-sensitive models, price hikes play a big role in impacting demand. Since this market is as it is de-growing, we are not concerned about demand,” said Ashwin Patil, Research Analyst at LKP securities
Automobile companies, including Maruti Suzuki India Ltd MSIL), Tata Motors, Volkswagen, Volvo cars, and Mahindra & Mahindra, announced price hikes on their vehicle offerings. Luxury carmakers, including Mercedes-Benz India, and Audi India, will be taking a price hike of up to 2 per cent on select models.
Discounts
Dealers are offering high discounts on existing vehicle inventories and are anticipating an uptick in sales. “Huge discounts are being offered from cash discounts, exchange schemes, corporate bonuses, and car accessories and parts with every purchase. The schemes are being offered with the OEM and are expected to increase sales before the end of the year. The vehicle price hikes will be compensated with the initial buying next year,” said Manish Raj Singhania, President of the Federation of Automobile Dealers Associations of India.
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