 "Cars")
Indian automotive manufacturers are set to implement price hikes across vehicle portfolios from April 2025, amid escalating input costs and regulatory pressures. Major players like Maruti Suzuki, Tata Motors, Hyundai, Honda Cars India, Kia, and Mahindra & Mahindra have announced price increases ranging from 2 to 4 per cent.
As net profit margins for original equipment manufacturers (OEMs) have mostly remained flat in the last nine months, analysts believe that, without these price hikes, profit margins would come under considerable squeeze.
Data from Bloomberg highlights the rising costs of key raw materials. The London Metal Exchange (LME) index climbed 11.9 per cent year-on-year, driven by a 12.8 per cent rise in copper and over 30.9 per cent in the tin. Nickel rose 3.9 per cent month-on-month but remained down 7.5 per cent on a year-on-year (Y-o-Y) basis. However, steel and crude oil showed declines, with Brent crude falling 16.4 per cent Y-o-Y to $72.5 per barrel.
"While manufacturers have absorbed some of these costs through internal efficiencies, the cumulative impact has necessitated price adjustments to maintain profitability. As net profit margins for OEMs have mostly remained flat in the last nine months, without these price hikes, they would face a considerable squeeze on their profit margins, potentially impacting their ability to fund future investments in research, development, and expansion," said Anurag Singh, advisor at Primus Partners.
For the nine-month period ending December 2024, Maruti Suzuki's net profit margin has improved by 48 basis points compared to the same period in the previous year. In contrast, Tata Motors and Mahindra & Mahindra recorded minimal changes, with increases of approximately 0.04 basis points and 0.28 basis points, respectively.
Industry experts believe price hikes are influenced by multiple factors, including the rising costs of electronics, regulatory compliance requirements, and premiumisation trends. "There are two major causes – the rising cost of features and electronics, and fluctuating input costs. While steel prices have been stable and oil prices have dropped, other factors such as labor costs and currency fluctuations are impacting manufacturers," Singh said.
Experts also noted that it is common for manufacturers to announce price hikes around this time to capitalise on March-end depreciation benefits.
"The industry's premiumisation trend, with increased spending on advanced technologies like advanced driver assistance systems (ADAS), hybrid systems, and electric vehicle development, is further contributing to rising research and development and technology costs," said Sanket Kelaskar, an analyst from Ashika Group.
The influence of currency fluctuations and rising manpower costs also contribute to the rise. "The US dollar has strengthened from 84 to 86 levels, and the Euro has risen from 90 to 94 levels,” Singh added.
Two-wheeler manufacturers are also expected to raise prices by nearly 2 per cent, with Bajaj Auto implementing a 1 per cent hike and Hero MotoCorp increasing prices by 1-2 per cent. The upcoming implementation of On-Board Diagnostics (OBD) Stage II-B norms in April 2025 is a factor pushing up prices, as OEMs invest in new technologies and emission compliance.
Analysts believe that while price hikes are necessary to offset costs, strong demand, middle-class tax relief measures, and new product launches will help maintain market stability. The Society of Indian Automobile Manufacturers (Siam) has retained its forecast, expecting passenger vehicle growth between 1-4 per cent and two-wheeler growth between 7-9 per cent in the coming year.
Costly affair
> Maruti Suzuki, Tata Motors, Hyundai, Honda Cars India, Kia, and Mahindra & Mahindra, announced price hikes ranging from 2 to 4%
> Price hikes influenced by multiple factors, including rising costs of electronics, regulatory compliance requirements, and premiumisation trends, according to experts
> Two-wheeler manufacturers also expected to increase prices by 2% — Bajaj Auto implementing 1% hike, Hero MotoCorp by 1-2 %
> Analysts believe strong demand, middleclass tax relief measures, and new product launches will help maintain market stability
