“What we are witnessing is that the pricing power for OEMs differs across segments. Sedans are a classic example. The segment has declined and value perception for SUVs, MPVs has improved, allowing OEMs to implement tougher price increases,” said ...
The strong demand for small sports utility vehicles (SUVs) has led to the sharpest price increases in the last three years in this segment. Data compiled by JATO, a global supplier of automotive business intelligence since March 2018, showed compact SUVs, the hottest segment at present, have seen the highest price increase of nearly 11%. Hatchbacks are up just over 4%, MPVs over 9%, premium hatchbacks 3.5%, premium sedans over 8% and the larger (more than four metre) SUVs have seen over 9% price hikes.
The hikes include both regulatory costs as well as raw material price rises, said car marketers. “What we are witnessing is that the pricing power for OEMs differs across segments. Sedans are a classic example. The segment has declined and value perception for SUVs, MPVs has improved, allowing OEMs to implement tougher price increases,” said Ravi Bhatia, country head, JATO.
The demand pull from customers for SUVs, small and big, has resulted in automakers looking at launching more models in this space. The sales of SUVs have overshadowed the growth in sedans and compact cars.
Agreed Ashish Modani, VP, ICRA: “The compact SUV segment is the best performing segment and the waiting period in this segment provides flexibility to OEMs to take a price hike.” The segment’s ability to absorb price hike is also dependent on its ticket price. “The entire cost is not completely passed on at one go for smaller vehicles because the ability of an Alto to absorb, say a Rs 5,000 hike, is less than the ability of a Vitara Brezza to absorb a Rs 7,000 hike,” he added.
Car dealers said pricing decisions are always demand and supply driven. Nikunj Sanghi, MD, JS4 Wheel Motor, said: “Sometimes best selling models cross subsidise their stablemates. Sometimes old warhorses — models that have been market leaders for many years — bear the brunt of the bigger price hikes.”
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The JATO data shows the top bestsellers with the highest markups since March 2020 have been the new variant of Range Rover (45%), BMW X5 (38%), new generation Thar (35%), new generation Hyundai i20 (19%) and facelifted version of Skoda Superb, new variant of BMW X3 and Audi A7 — in the 18-18.6% range.
