- GST cuts have reduced vehicle prices by 10% to 13% over recent years
- Automakers passed only 2% to 3% of commodity inflation through price hikes
- Car buyers have about 5% to 6% more affordability due to lower price rises
GST rate cuts have reduced vehicle prices by 10% to 13% over the years, while automakers have passed on only 2% to 3% of commodity inflation through price increases, Tata Motors Passenger Vehicles Managing Director Shailesh Chandra said on Friday. Chandra said this has left car buyers with about 5% to 6% in affordability headroom.
Rising household incomes are also supporting demand across small cars, first-time buyers and higher-end SUVs. He said the company continues to absorb a significant portion of higher commodity costs and is stepping up efforts to reduce costs.
"Still, there is a significant residual part of the commodity increase that we are absorbing, which has been hitting our markets, but at the same time we have been pacing our effort on the cost reduction side. We are reviewing every month in terms of when we'll have the opportunity to take a certain level of price increase,” he told PTI.
Chandra said any further increases would be gradual to limit their effect on demand. The company raised prices in September, but it was too early to say when the next increase would take place, he added.
He said manufacturers' price increases since the implementation of GST have remained below 5%, while discounts have declined as supply trails demand slightly. The slower pace of price increases has put pressure on margins, he said adding that uncertainty around commodity prices was also a concern, while ruling out any major alert on the supply or production side at present.
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Talking about compact sedans, Chandra said though their share has been declining in the overall sedan segment, their volumes have been increasing. "In just the last one year itself, it has grown by about 25-26%, so it is a growing segment in terms of size. It also has a GST impact. So there is a clear section of customers who are looking for a compact sedan," he said.
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