Hike Wave | Why Are Indian Automakers Announcing Price Hikes?

The year 2020 wasn’t the best for anyone. But with a constant rise in vehicle prices as well, it seems as if 2021 too, isn’t going to be kind to our pockets. But with the nation slowly standing back on its feet, one thing that has made us all wonder, is why are manufacturers are increasing vehicle prices, even when they’ve got the much-needed demand post the pandemic? Well, let’s find out.

The start of the rising trend

• The series of ill-timed price hikes started when the countries largest automaker Maruti Suzuki announced a price hike that would come into effect from January 2021.
• As per the OEM, a 1-5% hike ranging between Rs 5 to 35,000, depending on the model was implemented over the earlier ex-showroom price.
• The trend was then followed by Kia Motors; which despite being one of the best-performing companies of 2020, announced a hike anywhere between Rs. 20,000 to 35,000 on popular models like the Seltos and Sonet.
• Later Mahindra and Mahindra too joined the league, indicating that many of its models will see a rise in prices, from January 2021.
• However, despite a hike, manufacturers like Renault, Hero Moto Corp, Nissan and even Maruti Suzuki, increased the prices of their vehicles yet again in April 2021.
• Tata Motors joined the hike wave too when it announced a price hike of about 1.8 per cent in May 2021. And with two hikes “waves” already implemented, it looks like manufacturers are all set to induce a “third-wave” of price hike anytime in Q2.

Also Read: Tata Motors Car Sales Report For July 2021

The “Why” of the Price Hike

• Manufacturers may differ, but the “why” largely remains the same. The biggest culprit behind the hike wave as quoted by a majority of manufacturers is the constantly rising input costs that include the price of components such as steel.
• Other factors such as an increase in prices of crucial components such as semiconductors, a choking supply chain, and repeated waves of the pandemic have all contributed to the repeated hike waves.
• Maruti Suzuki in its regulatory filing quoted, “Over the past year, the cost of the company’s vehicles has been impacted adversely due to increase in various input costs.
• Hence, it has become imperative for the company to pass on some impact of the above additional cost to customers through a price increase.”
• In fact, soon after the BS-VI norms were set in motion, the demand for steel, rhodium and plastics which go into the production of passenger vehicles has increased manyfold.
• The rise in costs of these materials surely causes a cascading effect on the operating cost of OEMs.

Checkout: Mahindra, Hyundai, Kia, MG. Price Hike 2021 Begins!

The Bottom Line

Even though the nation has started to stand back on its knees after the havoc that was caused by the first wave of COVID-19, repeated price hikes have surely affected consumer sentiments. But manufacturers, on the other hand, are trying too hard to make a profit that is being haunted by a rise in input costs.

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