Indian automobile industry has been doing good business despite the fact that the economy is not doing too good. This is usually because there are many car buyers in India that look out for better cars that can offer them better mileage and driving experience. While there is a growing demand for better cars prices of various automobiles have increased gradually in India. Some of the financial experts believe that car prices in India will soar higher in the future although there is good amount of demand in the market. Here we take a quick look at some of the factors that are pushing the car prices higher in the Indian market.
Demand – Generally it is believed that greater demand can pull down the prices of various commodities and products, but things are going the opposite in the automobile sector mainly because the supply is not as quick as the demand. Most of the automobile manufacturers claim that their supply chain is not on par with the demand curve and therefore they need to put lot of pressure on their production lines to ensure that they roll out more vehicles per month that can cater to the car buying audience across the country. Top car makers like Maruti Suzuki and Honda both have said that the demand for cars in the Indian market is higher than the supply.
Taxes – While some car makers blame the never ending demands some car makers blame the tax policies and government rules that have come into picture. Car makers are always blaming the tax policies that they believe is not in the right way and does not allow them to get the right kind of profit that they need for. Hence, companies usually end up raising the overall price of the car to ensure that they still manage to get some profit after paying all the taxes and regulation and corporate fees to the government.
Cost of Raw Materials – In some of the earlier press conferences, car makers have said that the rising cost of raw materials have left them with no choice but to increase the car price in India. The companies claim that the prices for steel and rubber have impacted their income and therefore they have no option but to raise the overall car prices which is essential if they want to earn better income from the car sales that they make. Some of the financial and auto experts believe and agree with this claiming that the cost of raw materials often leave very little choices to car makers especially after the recent Union Budget where the cost of raw materials were hiked up. Maruti Suzuki was among the first car makers that decided to increase the price of Alto by 1.5% soon after the budget was announced and Hyundai and Toyota followed.
New Norms – While car makers are really happy with the rising demand for better cars they are equally concerned about the new BS 4 and BS 3 emission norms that has put various car makers into trouble zone. The new norms have forced car makers to come up with better and advanced engines that would comply according to the BS4 norms which make the car more environment friendly. However, that means new investments for car companies and that will in some way trigger the car prices in India. Maruti Suzuki had to move out their iconic Maruti 800 model from more than 13 cities across India as soon as the new norms were announced and implemented. Similarly some of the older cars were put aside which is also a margin loss for companies that leads to price rise for various new models in the market.
