Friday, April 25, 2014
By Jitendra Singh
Weak demand freezes the decision of price hike by auto companies
For Indian carmakers, profiteering has taken a backseat this time. After announcing price increases from April, most companies such as Maruti Suzuki, Hyundai, Tata MotorsBSE 0.45 %, Toyota Kirloskar, Ford Motors, General Motors & Mercedes Benz are holding on to their old prices to avoid any market backlash expected due to a weak demand and falling sales. Only a handful such as Honda Car India and Mahindra & Mahindra (M&M) have gone ahead with their price increases, while German carmaker Audi will change prices from May.
Car sales fell 7% in March to 2.38 lakh units. On a fiscal year basis, sales posted an overall decline of 5% to 17.86 lakh units. Despite huge pressures on margins most companies are not increasing the prices as the manufacturers blame muted demand and weak market conditions because of a sluggish economy. Car sales fell 7% in March to 2.38 lakh units. On a fiscal year basis, sales posted an overall decline of 5% to 17.86 lakh units. Despite huge pressures on margins most companies are not increasing the prices as the manufacturers blame muted demand and weak market conditions because of a sluggish economy.
All car companies increase their prices in January and April. Most of the companies raised prices in January and few also managed to increase prices in February, but not in April despite major announcements. A slowing domestic market, with company officials saying they are trying hard to match last year's sales for the month, has forced carmakers to freeze prices.
Market leader Maruti is yet to take a final call on price changes and since the company would declare its results today any change is not expected soon. "There are no plans to hike prices as of now," said a company official.
A senior Hyundai Motor India executive said that the domestic demand was weak and the market was slowing down. This has forced the company to reconsider any price changes even in the face of rising operating costs and margin pressures. We are in a cautious mode." Carmakers are alarmed as the market has showed no signs of recovery even after tax concessions by the government. Excise duties were brought down by 4-6% in February this year. Even that failed to trigger any incremental demand.
Source: Economic Times.
