Demonetisation effect: While offering discounts, car makers also raise prices

Car sales grew at its slowest pace in nine months in November following cash crunch after demonetisation

While car manufacturers are offering mouth-watering discounts they are simultaneously announcing price increases.  

Last month, car sales grew at the slowest pace in nine months after the cash crunch in the wake of demonetisation of high value currency notes. 

December is usually a lacklustre month; consumers often defer their purchase to January. 

This time, the double whammy of a dull November and an equally dull December has made car makers do a rethink on both production schedules and vehicle price. 

Honda, Ford and Hyundai have all said the prices of their products will be raised from January, despite the slump in demand. Maruti Suzuki said it raised prices in August but did not reply to an e-mail asking if it would again raise prices in January. 

Jnaneswar Sen, senior vice president (marketing and sales) Honda Cars India, said: “There has been pressure on us with regard to currency fluctuation and raw material prices. We will thus be raising prices in January. We are yet to finalise the amount.”

Honda’s decision came on the back of a 45 per cent sales slump in November, compared to the same month last year. It is currently offering discounts of Rs 1 lakh each on the BR-V, CR-V and Mobilio.  

Ford Motor India is raising prices by one to two per cent in January, even as it suffered a 22 per cent sales decline in November. 

Dealers have declined to add to their inventory, forcing the company to take a production holiday later this month. Ford is offering a discount of at least eight to 10 per cent (Rs 50,000 and above) on almost all its products. 

A company spokesperson confirmed the price hike for next month. 

Korean brand Hyundai is offering discounts of Rs 25,000-1 lakh on each of its products, Eon to the Santa Fe. Sales fell eight per cent last month; it confirmed a price rise next month. 

“November was challenging with a 50 per cent decline in enquiries but December would be worse. We are not expecting any dramatic change in sales. Car makers announce price hikes in December, hoping to drive consumers to showrooms,” said a dealer of Maruti Suzuki. 

Among the biggest losers last month was Mumbai-based Mahindra & Mahindra. While sales dipped by 33 per cent discounts on its products hit a new high. 

Its newest one, the KUV100 priced at Rs 4.5 lakh, for instance, carries a discount of Rs 70,000. To avoid piling of stocks with dealers, it has decided to observe 'No Production Days' this month at some of its plants, the company said on Friday.

Wooing buyers

Discount range (in Rs)

Hyundai

25,000-100,000 

Price hike: 1-2% 

Ford

30,000-50,000 

Price hike: 1-2% 

Honda

20,000-100,000 

Price hike: 1-2%* 

Maruti Suzuki

10,000-60,000 

Price hike: NA 

Source: Industry and Companies

*Expected