M&M defends price hike plan, feels it won’t impact demand

Despite the continued sluggish growth in the auto industry, India's largest utility vehicle maker Mahindra & Mahindra has justified the plan to raise prices in April and believes this will not have any further impact on the already subdued demand.

"The automotive industry has been impacted in terms of operating costs, be it in terms of the power costs, fuel costs, the wage increases, which have happened over the past 12-18 months; this has increased operating costs and that is what has necessitated revising the prices at the start of the new financial year, along with the normal practice that the industry follows," said Pravin Shah, CEO, automotive division, M&M.

M&M will raise prices across the board by an average 1% later in April, following the footsteps of other vehicle makers Renault, Maruti Suzuki, Tata Motors and Hyundai, which are also increasing prices. Shah said the price hike will only partially compensate the cost increases and given that majority of sales take place on 36-months or 48-months installments, price increases of 1% won't make a huge difference for the consumers.

M&M's sales last fiscal year declined 10%, while utility vehicle sales were down 18%.

The company is set to launch a new compact utility vehicle next year, to take on the likes of Ford Ecosport, which has raced ahead of M&M's current compact UV Quanto. "Quanto has had to face higher level of competition with the launch of new products and the prices at which they have come. We also plan to have our product range in the compact UV segment," he said. In a bid to strengthen its product range, M&M had said at the Delhi Auto Expo earlier this year it will launch three new platforms between 2015-2017.