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Sunday, April 14, 2024

The Big Three jack up vehicle prices on the turn of the New Year

News Analysis |

Automobile companies like Toyota, Suzuki, and Honda have begun their new year by surprising their customers with a gift of substantially increased prices of in-demand vehicles. Honda Atlas Cars announced that it is compelled to increase vehicle prices from Rs 50,000 to Rs 100,000 with effect from October 22 last year, on account of the negative impact of the falling exchange rate.

The company has now, once again, decided to raise prices in January 2019, which will take the cumulative increase to Rs 210,000. Prices of Civic variants had been increased by Rs100,000, which will be increased again in this month, taking the total rise to a massive Rs 210,000. Indus Motor Company (IMC), which had recently stopped car bookings, also made an enormous increase in vehicle prices following the recent round of rupee depreciation.

Honda has so far increased car prices three times. This trend seems to find no halt in its path.

The company raised prices in the range of Rs 50,000 to Rs 175,000 for November and December deliveries and Rs 100,000 to Rs 350,000 for deliveries from January 2019 onwards. Pak Suzuki Motor Company has jacked up the price of WagonR, Cultus and Swift by Rs 40,000 under the same pressure. Prices of Mehran, Bolan and Ravi were increased by 15%, 11% and 9% respectively, last year.

This caused a sudden drop in the sales of these three price-sensitive cars, which allowed United Motors and Master Motors to tap the low-priced segment cars which were previously dominated by Pak Suzuki. The rupee’s depreciation of over 26% against the US dollar in the past 10 months has left a devastating impact on many businesses, particularly the ones that rely heavily on imports.

Read more: Honda, Suzuki lose 50 percent profits

According to research analyst Farheen Irfan, “Auto companies are trying to pass on the impact of rupee devaluation, but the increasing car prices will hurt demand significantly,”. She also added that expensive cars and costly auto financing coupled with growing supply to the market with the entry of new players had painted a negative outlook for the industry. This is the fifth time this year Indus Motor has increased car prices following the rupee depreciation, which began in December 2017.

Suzuki has already raised prices four times and is expected to increase prices again following the 7%-rupee depreciation. Honda has so far increased car prices three times. This trend seems to find no halt in its path. It can be analyzed that automobile companies are trying to cover up the annual fall in sales that occurs at year-end. Traditionally, the premium on vehicles also drops in December.

Hence, one is inclined to think that these companies had announced the increasing cost of vehicles last year, to indirectly prompt and scare people into buying their vehicles before that actually happened – which worked to some extent. However, the second round of increasing prices this year is expected to anger customers more than warn them, and ultimately lower the broader realm of demand of their respective vehicles.