With the Indian automobile industry hit by constant changes in the geo-political scenarios, semiconductor constraints, inflation, and commodity prices, the prices of luxury vehicles could witness an increase in the coming quarters.
“I do see a hike in prices. We try and take the price increase absorption on our end and attempt not to pass on to the consumers, but not everything can be absorbed,” said Balbir Singh Dhillon, Head of Audi India.
Spike in vehicle prices
The German luxury carmaker, a part of the Volkswagen Group, locally assembles about 85 per cent of its vehicles and has witnessed semiconductor and commodity price fluctuations impacting the pricing of cars.
“Last one and half years have been a challenge on the semiconductor side but the situation is improving. There are challenges that are global, including sub-supplier challenges that were based in Ukraine, fluctuation of currency, shipping line availability with the cost, and metal costs. It is putting pressure on us in terms of the pricing of the cars. Over the last two years, there have been many price steps that most of us had to take and it is coming because of the commodity prices and the issues that we are facing right now,” said Dhillion.
Surge in demand
The industry witnessing a surge in demand for luxury vehicles post-coronavirus has led to the double-digit growth of automobile companies.
“The luxury segment has been leading the overall automotive industry growth. For Audi, we grew by 101 per cent last year and for the first nine months, the growth was by 29 per cent. The demand in the last quarter has also been good,” said Dhillion.
Supplies
Despite an uptick in demand for luxury vehicles, companies continue to witness an impact on the supply of vehicles.
“Stock levels are historically low at our end or the dealer’s end. It is just a replenishment of the existing orders. There is high demand with a limitation of supplies. We are hopeful that in the next three quarters the situation will improve,” said Dhillon.
Semiconductors and PLI Scheme
With the introduction of the PLI scheme, the luxury car maker is hopeful that the semiconductor constraints will be resolved.
“Semiconductor manufacturing is very intensive on initial investments and it takes time before anything can come forward. Things are improving and with the PLI scheme, India will also become a manufacturing hub and the issue will be solved over some time. However, the problem will continue for some months next year as well. We are not completely out of the woods,” said Dhillon.