India: New year likely to witness price hike across auto sector

Buoyed by a sustained pull in demand for the fourth consecutive month, the automotive companies across the board are expected to hike prices of their vehicles in January to offset input cost pressures and improve their sagging profit margins. The hike, which comes into effect from 1st January '21, will affect buyers of two-wheelers, cars, SUVs and commercial vehicles.

Car companies are all set to raise prices from Jan '21 for the following reasons mentioned below:

• Sales of vehicles adversely impacted due to lockdown
  
  
• Increased input costs across the globe due to Covid impact
  
  
• Weakening rupee against dollar where almost 5%+ depreciation has been seen this year
  
  

India's largest carmaker, Maruti Suzuki India Limited (MSIL) is mostly likely to hike prices to 1% to 1.5% across its range due to rising input and material costs. Maruti had raised prices of its range in January 2020 but anticipates the hike to be more substantial for 2021, given the circumstances surrounding the COVID-19 pandemic this year. The drop in demand in November was due to exhaustion of inventory and decline in production owing to plant holidays taken during the month.

Hyundai India will perhaps hike prices (up to 1.5%) of its models in the coming new year. Their entire range is likely to go through the price revision due to rise in input and material costs. However, the extent of the price hike will probably be known in January 2021. Different price hike increments are expected depending on model, variant and fuel type.

The country's leading two-wheeler maker, Hero MotoCorp may hike prices by up to INR 1,500 from January 1.The increase in price will vary across models, and the exact quantum is likely to be communicated to the dealers in due course.

Japanese auto major, Honda plans to increase vehicle prices in India from next month in order to adjust the impact of rising input costs, especially raw materials and commodity prices.

The largest tractor manufacturer, Mahindra & Mahindra (M&M) will hike prices of its its range of tractors, passenger and commercial vehicles across different models from next month in order to partially offset the impact of the rise in input costs and commodity prices.

Outlook

Commodity prices of steel, aluminum, copper, lead and rubber are expected to inch up higher in the second half thereby, adversely impacting margins in the auto component industry. The main concern is the escalation in costs, however, the demand continues to remain robust and sustainable on the back of the festive season and new launches.