Amidst increasing car prices, concerns around unsold inventory loom large

Top carmakers including Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Honda Cars and MG Motor have announced an increase in car prices from January 1 even as the Federation of Automobile Dealers Associations (FADA) has said that unsold inventory is leading to a build-up of vehicles with dealers—inventory levels are around 63-66 days at the moment.

Experts, too, have aired concerns over the increase in prices. FADA, in the last few months, had expressed concerns about the inventory build-up, saying that without substantial intervention, the weight of unsold stock could lead to significant dealer distress.

Experts say price hikes in January may be a way for the companies to offload their existing inventory, before the year ends. The companies point to the rise in commodity prices as the reason for the hikes. “The company has planned to increase the prices of its cars in January 2024 on account of increased cost pressure driven by overall inflation and increased commodity prices. While the company makes maximum efforts to reduce cost and offset the increase, it may have to pass on some increase to the market,” Maruti Suzuki said in a stock exchange filing.

MG Motor India, too, said escalating costs associated with overall inflation and heightened commodity prices is the reason they’re going ahead with the price increase. To mitigate the impact of the price hike, MG Motor has introduced a series of special year-end offers for prospective buyers.

Even luxury carmakers like Audi India will have to resort to price increase in the New Year. Audi India announced a price increase of up to 2% across its model range, effective January 1, 2024. “The price hike will apply to all models, including Q3 SUVs and sports cars. Rising input and operational costs is the reason for the price increase,” the company said. 

Also Read: MG Motor India to hike prices across all car models from January