A A week ago in Bengaluru, BMW unveiled the third generation of its popular ‘compact’ sports utility vehicle, the X1. The new X1 has everything you would expect from a modern luxury car, even an entry-level car such as a large integrated infotainment screen and digital cockpit. It’s all great. Except the new X1 costs an impressive Rs 45.9 lakh for the petrol and Rs 47.9 lakh for the diesel. You might ask if the X1 wasn’t too cheap before. Yeah it was. When the German brand launched the original X1 in 2010, the price for the entry-level petrol started at just Rs 22 lakh.
This price inflation is not limited to German cars only. Back in 2008, I bought my second car, the first generation Hyundai i20, in the top spec Asta, and I paid around Rs 6.5 lakh for the car on the road. The latest i20 of similar specification – a naturally aspirated and manual transmission variant – costs Rs 10 lakh more on the road. When friends, family and acquaintances call me for car advice, they are shocked at where the prices have gone. And given the strong demand for most cars these days, with long waiting periods, discounts are now a thing of the past.
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Why have cars become so expensive?
For one, most cars have become heavier and more feature-loaded – the newer variants in the lower segments are now as large as the older variants of the previous generation cars. While the i20 is constrained by the 4-metre rule, the new third generation X1 is almost as big as the BMW X3 a few years back. And this is the case in many other vehicles and brands as well. The new Škoda Slavia, for example, is as large as the original Škoda Octavia—vehicles belonging to two different sedan sub-segments. Similarly, the new Mercedes-Benz A-Class is as large as the older C-Class variant.
But size inflation doesn’t fully explain why prices have risen. Even if the amount of steel, rubber, and plastic on a specific model has gone up and commodity prices have doubled, that’s not the case with the amount of scrap value you’ll get for a new car versus an old car. Very different.
The ‘more metal’ argument can be used by manufacturers to claim that one of the reasons for the price hike is safety. Cars may actually use less steel these days, but the grades of steel used are much more expensive. Ultra high-strength steel (UHSS), used in critical areas for safety reasons, is much more expensive than regular steel. But judicious use and computer-aided engineering help manufacturers keep costs down there, too. In fact, manufacturers across the board have gone to extreme lengths to cut down on operational costs, from reduced workforce to reducing wastage. Then, why haven’t you seen the benefits of such cost-cutting in the showroom?
The primary reason is demand. and it is in demand Fully loaded top-end variant, This allows manufacturers to announce small ‘price hikes’ every few months and blame it on everything from commodity prices to Stable and even that has decreased since the start of the Ukraine conflict for lack of semiconductor, which is no less of an issue today. However, this shortfall will continue for a few more quarters.
Simply put, manufacturers are raising prices because they can. And they also know that there’s not much you can do as a buyer. Not that you can go to another rival company for a cheaper product or much earlier delivery date. Because wherever you go, the story remains the same. And in the luxury segment, strong demand in China and the United States has pushed India to the back of the queue in terms of getting the assembly kits.
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future relief?
So are things about to change soon? In fact they may already be. There has been a huge reduction in the prices of luxury cars in China and America. Tesla customers in China nearly went into an uproar when they learned the electric car maker had cut prices. As long as the Indian economy is growing at more than 6 per cent, demand will maintain the momentum. The automotive industry is cyclical like many others And in India too the prices should come down, maybe even come down.
But don’t hold your breath for that to happen and convince yourself to stick with your buying decision. Yes, there will be minor ‘price adjustments’ like Tata Motors cutting prices of the Nexon EV after Mahindra launched the XUV400. But they were very small. And I know I may sound like an industry shill, but if you must buy a car now, just go for it. Otherwise, you will be left behind in the queue.
@kushanmitra is an automotive journalist based in New Delhi. Thoughts are personal.
(Editing by Anurag Choubey)