The auto sector has been badly hit by the COVID 19 pandemic and the resultant lockdown. Not only did people put off auto purchases to limit physical exposure; the fact that so many people lost their jobs or started earning less also deterred purchases. With things now limping back to normal, many would have revisited their plans to buy a new car or two-wheeler. Is this a good idea?
According to a Care Ratings report, it is predicted that demand in the auto sector will continue to remain low in times to come. The tractor segment has been the best performing segment because the agriculture segment has shown itself to be the most resilient in lockdown times. However other auto segments have a much grimmer aspect. Wholesales of two-wheelers may drop by 18%, commercial vehicles may drop by 30% and three-wheelers may drop by as much as 73% during this financial year.
Add to this the fact that auto manufacturers currently battle a rise in input and commodity prices. It is therefore expected that manufacturers will raise auto prices to combat higher costs and lower demand. Several auto manufacturing companies have announced prices increases from January 2021 onwards. This is meant to offset the increase in prices of precious metals, aluminium, steel, plastic and other raw material costs.
India’s largest auto manufacturer Maruti Suzuki made an announcement in December 2020 that it would be raising prices to counter rising input costs. The extra costs incurred would be passed on to the customer, it was announced. Kia announced that prices of the Sonet and Seltos would rise. MG SUV prices are expected to go up by 3% while BMW Mini could be costlier by 4%. Hyundai, Mahindra, Renault and Honda have also made similar announcements of price rises. Two-wheeler manufacturers such as Hero Motocorp have also announced an increase in prices across models.
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