Vehicle price hikes are emerging as the biggest threat to India’s festive-season auto sales after a strong first half of FY27, with dealers warning that higher prices could erode the benefit of last year’s goods and services tax reduction.
Sai Giridhar, president of the Federation of Automobile Dealers Associations (Fada), said consumer offers could partly offset the increases, but maintaining affordability would be crucial for sustaining demand. “The silver lining out here is that, apart from the price hikes, there are consumer offer schemes,” Giridhar told Mint. He said offers had been largely eroded when vehicle prices were reduced last year.
“The entire ecosystem is built around keeping prices affordable,” Giridhar said, adding that the industry could feel the impact if consumers began to perceive vehicles as less affordable. Fada also identified price increases as the foremost risk for the quarter ahead in its monthly sales note dated 6 October.
“One year on from GST 2.0, affordability remains the single engine of this cycle, and dealers now flag further price increases eroding that very affordability as their foremost risk for the quarter ahead,” the dealers’ body said. It added that protecting the benefit of the GST reduction would be important for converting festive-season demand into sustained growth.
The warning follows a period of strong retail sales. Fada data released on 6 October showed vehicle retail sales in the first half of FY27 rising 20.77% year-on-year to 15.51 million units. Passenger vehicle sales increased 24.48% to 2.54 million units, while two-wheeler sales grew 20.43% to 11.04 million. Commercial vehicle sales rose 21.48% to 585,217 units.
Several major manufacturers have raised prices multiple times this year amid continuing cost pressures. Maruti Suzuki India increased prices by up to ₹30,000 in June and August, followed by a hike of up to ₹20,000 on selected models in September. Hyundai Motor India raised prices by about 0.6% in January, by up to ₹12,800 from June and by up to 1% from September.
Tata Motors Passenger Vehicles increased prices three times, including a weighted average 0.5% rise for internal-combustion-engine models in April, a hike of up to 1.5% across its portfolio in July and an increase of up to ₹25,000 in September. Mahindra & Mahindra raised prices by up to 2.5% in April and by an average 2.7% for sports utility vehicles in July.
Two-wheeler manufacturers have also implemented increases. Hero MotoCorp has introduced a cumulative blended average price hike of about 4.5% across its internal-combustion-engine portfolio since late February. TVS Motor and Bajaj Auto managements have also said that their companies undertook price hikes in FY27.
Analysts at Nuvama Institutional Equities identified both weaker rural demand and price increases as downside risks to sales. In a 9 September note, they cited rainfall deficits in some states and said the impact of price increases being implemented across categories could affect demand.
The pressure could continue as manufacturers respond to higher costs. Tata Motors Passenger Vehicles managing director and chief executive Shailesh Chandra said in September that only a limited part of the cost increase had been passed on to consumers. He said further increases were likely over the following months to offset the impact of the West Asia war on supply chains and logistics costs.
Dealers and manufacturers are now entering the festive period with sales momentum intact but affordability under pressure. Fada’s latest assessment places consumer offers and the management of further price increases at the centre of the industry’s outlook for the coming quarter.
