Automakers are going to announce hike in car prices ranging between ₹10,000 and ₹30,000 with the imminent migration to on-board diagnostics (OBD) 2-compliant vehicles from April. The price hikes could be implemented across categories.

As part of BS-VI stage 2, passenger vehicles are mandated to fit a diagnostic device called On Board Diagnostic (OBD) 2 from April. The devices will monitor emission levels in real time with earlier tests conducted in a laboratory. The changes will be undertaken in the engine of the vehicles including the software.

The vehicle price hikes are expected to be between ₹10,000 and ₹30,000 on passenger vehicles and up to ₹2,500 on entry-level two-wheelers.

Industry experts have pointed out that entry-level passenger vehicles and the two-wheelers segment will be affected the most by the increase in price hikes.

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“The only outlier will be ICE two-wheelers (those powered by internal combustion engines) wherein OBD is staggered in two parts and OBD II which will be applicable from April 2023 may lead to an end price increase. OBD norms will lead to a minor increase in vehicle prices across segments. The broad range could be 1-3 per cent.” said Hemal Thakkar, Director, of CRISIL Market Intelligence and Analytics.

Recently, German luxury carmaker Mercedes-Benz announced a price hike of up to 5 per cent on its vehicles in India from April 1, 2023. The carmaker stated that the depreciation in value of the currency compared to the Euro and increased input, as well as logistics costs, have been exerting significant pressure on the company’s overall operational cost.

Spike in EMI

As vehicle prices increase, the Equated Monthly Installment (EMI) on passenger vehicles and two-wheelers will also go up.

“The entire industry is worried about the price hikes owing to the changes in the norms. The price hike will increase the EMIs. Customers have multiple loans and with an increase in vehicle EMIs and other loan increases they will face challenges from every front,” said Manish Raj Singhania, president of the Federation of Automobile Dealers Association.

With nearly 7,00,000 passenger vehicle bookings the industry is not anticipating a major dip in demand for vehicles. Dealers have also started stocking OBD 2 vehicles.

Different models, different hikes

Vehicle price hikes will be based on variants and the hike on diesel vehicles will be more than petrol variant vehicles.

“From April onwards we are moving towards new emission norms, RDE and OBD 2 norms which involve a change in specks and that means there would be additional costs. Additional cost means an increase in prices but we have not yet decided on a price increase because we are watching the situation. The increase and change in the price structure because of the RDE norms will be different for different models. It depends on the model as to how many changes are going to be made in the engine. Some that have new engines will require smaller changes and so smaller price hikes,” said Shashank Srivastava, Senior Executive Officer, Marketing and Sales, Maruti Suzuki India Limited to businessline.

Commodity prices

Automakers have also pointed out that commodity prices will further determine the change in vehicle prices.

“Commodity prices in the last few months have softened and plateaued for example steel and copper. But if you compare it to two years back it is still high. A lot depends on the commodity price movements of which 75-77 per cent is the material cost. Much of the other costs can get covered,” added Srivastava.

Honda Motorcycle and Scooter India (HMSI) had stated that they would evaluate conditions before taking a price hike: “There will be no immediate price hike, but it depends on factors, including raw materials and emission norms. If force is negative, then we will have to take a price hike,” said Yogesh Mathur, operating officer, Sales & Marketing, at Honda Motorcycle & Scooter India.

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