Price hikes to curb the recovery for Indian carmakers after the holiday boost

MUMBAI: Indian car manufacturers‘ plans for transfer higher commodity prices for customers cloud prospects for a request recoveryafter December when the Increase in some categories by repressed demand e festive Spending fades and the economic impact of the coronavirus pandemic reasserts itself, Fitch Ratings said Thursday.
Repressed demand after the gradual easing of government lockdown measures helped the return of the monthly wholesale volume of passenger vehicles (PV) for growth after July. Photovoltaic wholesale volumes increased 13% year-on-year in the quarter ended September.
Holiday demand helped sustain growth after September but the pace slows down for 5 percent in November from 14 percent in October. This is also after including the time benefit from the Diwali festival which falls in November instead of October. This indicates pent-up demand is diminishing, Fitch said.
Demand in other car categories remained weak. The wholesale volume of commercial vehicles (CVs) decreased by 20% in the quarter ended September after a sharp decline of 85% in the previous quarter, reflecting the challenges stemming from overcapacity in freight transport, poor funding availability and reliance on more cyclical end markets, especially for medium and heavy commercial vehicles (MHCV).
Wholesale CV volumes reported by major manufacturers including Ashok Leyland Ltd, Tata Motors Limited and Mahindra & Mahindra suggest that volume returned to normal levels in October and November, but registrations fell by more than 30%.
Monthly shipments of two-wheeled vehicles (2W) for dealerships increased by two figures after August. However, retail sales continued for decline underlining the challenges stemming from the limited availability of finance in rural areas, which offset better demand from good harvests and consumer preference for personal mobility in the midst of the pandemic.
The car manufacturers reported that profitability in the three months for September, the second quarter of the fiscal year ending March 2021 (FY21), increased from Q1 FY21 as it benefited from better fixed cost absorption resulting from higher volumes, cost efficiency measures amid the pandemic and prudent pricing practices.
Fitch said these factors helped for counterbalance rising commodity prices such as car manufacturers he chose not for raise prices in an uncertain environment. However, some leaders car manufacturers recently announced their intentions for to increase prices from January 2021 with the aim of transferring the sustained increase in raw material prices from June.
“The extension of the price the increases are not clear at this stage, but we believe they may vary from low for average single figures depending on the model and company. We expect more car manufacturersfor raise their prices, as competitive margins and market participants are largely synchronized price moves in the past. ”
The price increase will further increase the cost of ownership of vehicles afterpriceexcursions of up for 15 percent from April 1 following the implementation of BS6 – a stricter framework for emissions. This will be moisten consumer confidence in an environment of already weak demand.
“We believe the impact will be more pronounced on CVs that have seen an increase price increases in percentage terms in April, “he said