Car makers threaten price hikes to clear inventories

Car companies are at it again. Battling a slowdown, carmakers engaged in their annual price hike threat to get customers to showrooms and clear inventories. Ranging from Maruti Suzuki, Hyundai, Honda and Volkswagen and General Motors, most of the companies spoke about "pressure on operating margins" to justify the talk of price hikes. 

However, the steep discounts offered on models - especially the slow-moving petrol variants - gives away the theory of pressure, and points to poor demand.

While Maruti has discounts of Rs 20,000-25,000 on models such as WagonR, Estilo, Ritz and SX4, Hyundai has benefits of up to Rs 50,000. Tata Motors, Volkswagen, Ford and Honda are also offering schemes to lure buyers. 

"It is the slowdown and the normally-sluggish December off-take that prompts companies to issue statements of price hike during this time of the year. Many customers normally do not want to purchase a vehicle in December due the change in model (say, from 2012 to 2013)," said a car dealer. "Companies normally resort to a minor hike in January, while doling out discounts in December." 

However, car company executives said that the hike has been necessitated by pure economics. Mayank Pareek, Maruti's COO (marketing & sales) said that the price hike is necessitated due to rising pressure on the margins due to the currency fluctuation. "There will be a hike in the prices of our products. Quantum will vary depending on models, but it can be up to Rs 20,000," he said. 

Rakesh Srivastava, VP (marketing and sales) at Hyundai India, also echoed similar sentiments. "Macro economic conditions have not been favourable this year. There is pressure on margins on account of low volume growth and increase in various costs. We are considering a price increase, the quantum and timing will be communicated once we finalize the details."

Also read: Chevrolet announces price hike for January 2013