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Why Are Carmakers Announcing Price Hikes?
But we feel there is just an iota of truth in their statements. Carmakers like any other business are mostly under cost pressure. They always try to reduce costs while maintaining, if not increasing profitability. Increasing prices is one of the regular aspects of a business but what tickles the brain is the timing.
Almost all of them have announced they will increase prices one month in advance. Is this timing an attempt not to shock customers who walk in to showrooms in January or is it just an attempt to clear out stagnant stocks?
It is very clear that the automobile industry is going through a tough phase with sales slowing down. Although the festive season did increase sales it is not extending in to December. So announcing a price hike a month in advance will mean people who were not planning to buy cars until next year would also come in to showrooms to save some cash.
The January car price hike might help carmakers attract some customers but that doesn't mean it is very useful. Car firms are already offering discounts on slow selling petrol cars. Even if they sell more such cars the total amount of discounts carmakers will incur will also increase. Further sales will definitely reduce once the new prices become effective.
Carmakers are definitely looking at short term gains and ignoring the long term effects. Many prospective car buyers who would have planned to buy cars before next year's budget might end up buying cars in December itself. So carmakers are definitely taking a gamble by announcing a price hike one month in advance.
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