Car prices could go up for in the next couple of weeks even as a multitude of automakers have expressed the view that rising input prices and margin pressures has led to them having to consider price hikes across their model ranges. Although the Indian Rupee has somewhat stabilized near the 60 rupee/USD mark, the uncertainty surrounding the Indian currency is said to be another factor that is weighing on car makers’ intentions to raise prices.
If effected, the latest price hike could be the third such hike this year. Last month, car makers dropped prices on the back of the 2014 Union Budget doling out excise duty cuts with a view to improve buying sentiment. However, the lower excise duty and the accompanying price cuts have done little to spur car sales. In fact, passenger vehicle sales actually fell by about 4 % last month, reflecting the weak economic sentiment in the country.
Maruti Suzuki, Hyundai, Mahindra, Honda, Tata Motors, Ford and Renault are the chorus of car makers likely to raise prices in the coming weeks. Higher car prices could further dampen buying sentiment as India goes to the polls. If India does get a stable government that puts the economy into a higher gear, car sales could pick up after the first half of the year. However, an ICRA report suggests muted growth for the Indian car sector over the next one year.
Although car makers are all set to hike prices, a weak demand in the coming months could lead to hefty discounts being served up across car brands. With industry bellwether Maruti Suzuki taking to large scale discounts even on its best selling cars, the discounting phenomenon could gain further momentum if car sales fail to pick up substantially in the coming months.
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