Price hikes and premium push: What explains automakers’ latest moves?

Subscribe to enjoy similar stories. Price hikes by automobile companies will kick in from 1 April, casting a shadow over India's already struggling passenger car market. Struggling with rising prices of key raw materials and nervous over uncertainty created by the US' new auto tariffs, carmakers have shifted focus from the mass market to the high-end segment to maintain profitability.

Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Hyundai Motor India, and Kia—accounting for nearly 85% of India's passenger vehicle market—are leading the charge with hikes of up to 4%, citing rising input and operational costs. While carmakers generally increase prices in January and April to clear older inventories and make adjustments for price pressures, so far this calendar year car companies have raised prices three times. This is puzzling considering India's struggling car market.

Passenger vehicle sales grew a mere 5% in 2024, with five months witnessing a contraction. The sector's recovery hopes for 2025 are dampened by a contraction in car sales in February after some growth in December and January and the latest price revisions. Ravi Bhatia, president of JATO Dynamics, an automotive business research firm, pointed to a pattern of significant price increases that he said had contributed to market stagnation.

Also, while raw material costs are down compared to their 2022 highs, they have shown signs of a pick-up in recent quarters. Further, the rupee's depreciation and the impact of the US tariff uncertainty are keeping automakers on their toes. Moreover, long-term hedging contracts have prompted companies to adjust prices preemptively to protect their profit margins.