How much are you willing to pay extra for new car? Price hikes new order of day

The Indian car industry has never had it this good. Demand for passenger vehicles has been steadily rising and shows no signs of slowing down. And after challenges of Covid years, the turnaround has been quite spectacular. But what is even more spectacular is that the demand continues to remain robust despite recurring price hikes from manufacturers. New cars are now pricier than ever before but should OEMs take customers' positive buying sentiment for granted? Can they? And for how long?

Over the course of the past year or so, almost every single car manufacturer in the country has announced at least one price hike. Some of them, multiple hikes. And this is across segments, whether luxury or mass-market. Experts maintain that while price hike or hikes may not deter buyers in the luxury car space, it could eventually deter customers looking at options in the mass-market segment, especially those eyeing entry-level options.

Sanjay Arora, an IT professional based out of Gurugram, booked a hatchback from well-known brand back in November. By the time he took the delivery of the car - meant as a graduation gift for his daughter - in January, he was paying ₹12,000 extra. “The extra I paid may seem insignificant considering the overall price of the vehicle but somewhere, it does pinch. Also because cars these days are taking months to be delivered anyway," says the 55-year-old.

Manufacturers opt to put the blame on factors such as inflationary pressures and rising input costs. Every single manufacturer at every single price hike announcement also claims they have no option but to pass some of the cost to the end customer. On Wednesday, RBI also raised the key policy rate by 25 basis points to 6.50 per cent, a new pain point for car customers. “With this hike, RBI has made the 6th rate hike since May'22 and total hike now stands at 2.1%. This decision of RBI will have a detrimental effect on price-sensitive entry-level passenger car segment and entry level two-wheeler segment which are already reeling under pressure due to regular price hikes," says Manish Raj Singhania, President, Federation of Automobile Dealers Associations of India. “Above this, the rate hike will lead to an increase in EMIs payments which will increase the operating cost."

With escalating prices and increasing EMI payments now, there is a subtle word of caution being sounded within the Indian auto industry which otherwise predicts a strong 2023 after a largely impressive 2022.