Brace yourself for another round of price hikes in cars, two-wheelers, smartphones, laptops, televisions, refrigerators and air-conditioners.
Consumer electronic prices may see a spike of up to 8%, whereas cars and two-wheelers may see a rise of 1-2% in the coming weeks.
Brace yourself for another round of price hikes in cars, two-wheelers, smartphones, laptops, televisions, refrigerators and air-conditioners. Thanks to an unrelenting increase in input and freight costs, big-ticket consumption items are set for an unprecedented fourth to fifth round of price increases this year, ahead of peak sales time — the festive season.
“We have never seen worse times than these on costs,” said one manufacturer.
Consumer electronic prices may see a spike of up to 8%, whereas cars and two-wheelers may see an increase of 1-2% in the coming weeks. Cars and two-wheeler prices have seen hikes in instalments of 10-15% on several occasions in the past 12-18 months.
Imports Get Costlier Cars have become dearer by Rs 50,000 to Rs 2.5 lakh, depending on model prices ranging from Rs 5 lakh to Rs 25 lakh. For two-wheelers, the price hikes during this period have pushed up the cost of acquiring a bike or a scooter by Rs 5,000 to Rs 10,000.
Steel has almost doubled, while aluminium and copper have gone up 20-25%. That’s been worsened by the semiconductor shortage — chip prices rising 25-75%. On top of all that is the spike in freight costs, up two-three times, making imports pricier.
The surge has badly dented the price-sensitive two-wheeler market, while car buyers have better absorbed price increases as evidenced by buoyant bookings.
The price of the 10 top-selling car models has changed on five occasions in the first nine months of this year, said Ravi Bhatia, president of consultancy Jato Dynamics India
“Not only that, the weighted average incentives have declined from Rs 13,000 to Rs 8,000 per car,” he said. “The waiting time for deliveries this festival season is high, and the OEMs (original equipment manufacturers) have no other choice other than passing off the burden.”
Smartphone prices are up 3-5% as manufacturers start rolling out new models. Even some existing models have become costlier, researcher IDC said.
Appliance brands such as Bosch, Siemens and Hitachi are raising prices 3-8%. Others are thinking of doing so next month.
IDC India research director Navkendar Singh said smartphone and laptop companies have already factored high input and freight costs into the pricing of new models that are being rolled out before the festive season. Companies have raised prices on some existing products.
Prices of televisions, air-conditioners and home appliances such as refrigerators, washing machines and microwave ovens are set to rise 3-7%. Some companies will likely decide on price tags early next month.
For consumer electronic and home appliance makers, this will be the fourth time that prices are going up since December-January.
Neeraj Bahl, managing director of BSH Household Appliances India, which sells Bosch and Siemens appliances, said the company will increase prices 3-5%, which will take the cumulative price hike since last December to 10-12%.
“It’s an absolutely crazy situation,” he said. “This hike is still not sufficient since the total effect of an increase in input cost is 25-30%. Every company is struggling and those with deep pockets and ability to absorb losses may defer it temporarily.”
AC and refrigerator maker Johnson Controls-Hitachi Air Conditioning India will raise prices by 5-7% next month. Managing director Gurmeet Singh said what’s bludgeoning the industry beyond the increase in commodity prices is the component cost spike.
“Compressor prices are more than 30% over last year at the same time,” he said. “Freight costs from China and Thailand are 10 times over last year — we have never seen worse times than these on costs.”
Compared with last year, copper, steel and refrigerant prices are up by 50-55%, while aluminium and plastics have gone up 40-50% for consumer goods makers.
Factories in China, Taiwan, Vietnam were shut due to a surge in Covid cases, disrupting supplies, which elevated freight costs.
The auto industry has already seen four hikes in less than 10 months, against a typical once a year.
Due to competitive intensity and price sensitivity, companies have been compelled to absorb a large part of the input cost, they say, especially for price-sensitive economy models.
In the past 12 months, Hero MotoCorp’s Splendor is up 5%, whereas the more premium Royal Enfield Classic is 11% costlier. The mass-market TVS Jupiter is up 4%, whereas the price of Apache premium motorcycles has risen 8.47%.
The price of Maruti Suzuki’s entry-level cars is up in the low single digits.
The cost of raw materials accounts for 68-74% of the total sales value of the product. This cost increased by 300-500 basis points in the past year. To be sure, rising input costs pulled down Maruti Suzuki’s gross margin to 21% in the June quarter as against the long-term average of 27%.
