Cost Cuts or Price Hikes? Where Hyundai's Verna and Creta Are Headed in 2024

India has announced a price increase across its entire model portfolio that came into effect recently. The move is in reaction to growing production expenses. It includes higher input costs, unfavourable currency rates and an increase in commodity prices. All of it emphasises the auto industry's financial concerns.

HMIL relates the price rise to a number of external economic factors. The volatile global economic climate has resulted in a steady rise in input costs. Furthermore, currency volatility and a surge in commodity prices have contributed to the company's increased operational costs. Despite efforts to absorb rising costs, the situation has reached a stage where a price adjustment is required.

Hyundai Motor India makes every effort to absorb cost increases while maintaining consistent customer satisfaction. However, passing on part of the growing input costs to the market has become necessary through a slight price hike. The price increase has been implemented from 1st January 2024.

Today, HMIL has a robust network of sales locations and service stations throughout India. The fully integrated and advanced manufacturing factory in Chennai boasts superior production, quality and testing capabilities.

Increasing prices due to inflationary pressures have put automakers in a tough spot. Popular models like the Verna and Creta have seen input costs and operational expenditures rise over the past year. This poses a question - will Hyundai focus on cost-cutting or hike the prices of Verna and Creta in 2024? Here's an in-depth analysis.

Why Creta and Verna are Popular? Creta and Verna have grown popular among budget car buyers. It is because of their impressive combination of features, dependability and cheap cost. Both versions include a robust safety package, including several airbags and ABS, offering peace of mind. They are outfitted with sophisticated infotainment systems that facilitate smartphone integration, which improves the driving experience. Both automobiles have excellent fuel economy, making them cost-effective for regular use.

Furthermore, the reputation of this car brand for durability and high resale value adds to the attraction. It guarantees that customers obtain a car that will hold its worth over time. The combination of these features distinguishes Creta and Verna as outstanding options for individuals wishing to maximise their investment.

Factors Impacting the Costs of These Car Models • Rising commodity prices - Steel, aluminium, copper, plastics and rubber have become pricier. This impacts Hyundai's raw material costs significantly.

• Increased logistics expenditure - With fuel prices rising, supply chain operations' transportation costs have increased.

• Stricter regulatory costs - Upcoming safety norms like 6 airbags as standard will involve investments for compliance.

• Technology transition costs - The shift towards features like ADAS, connectivity and EVs is increasing per-unit costs.

• Higher marketing spending - Competition is forcing auto brands to increase promotional budgets to attract buyers.

• Plant operating costs - Energy, manpower and administrative costs of running factories have also risen with inflation.

• Microchip shortage - The scarcity of semiconductors has led to a supply-demand mismatch, impacting costs.

Cost-Cutting Initiatives by the Car Maker Hyundai has several cost-cutting initiatives it can leverage to help offset rising input costs and overheads. One approach is greater parts sharing between models like Creta and Verna to reduce product development costs. Increasing localisation by sourcing more components like electrical parts, aggregates and plastics from domestic Indian vendors can also lower costs. Hyundai may also look at offering reduced features in lower variants of its models to make them more affordable. Value engineering through design and material changes is another avenue to lower costs without compromising quality, for example, using thinner seats. Higher exports can help Hyundai gain from economies of scale and absorb fixed costs better. Producing and selling more manual variants over pricier automatic models is also a cost-saving approach. Overall, Hyundai has multiple operational and strategic levers to optimise costs and maintain viability.

However, excessive cost cutting also runs the risk of Hyundai models losing their appeal if perceived quality or features are affected. As premium mainstream brands, Verna and Creta cannot afford to compromise too much only to chase low costs.

Potential Price Hikes to Maintain Viability Given the sustained increase in overall costs, Hyundai will likely have to consider prudent price hikes for its models to maintain viability. This is supported by factors like Hyundai's strong brand image and leadership position, which allow room for small hikes. The introduction of improved variants with more features also enables customers to accept Verna and Creta price increases. Rising income levels mean buyers may have more budget room to manage hikes. Since the entire auto industry has faced cost pressures, buyers may understand the need for OEMs to hike prices moderately. Reduced discounting can partially offset price rises to maintain dealer margins. Finally, as demand rebounds faster than supply, auto brands can hike prices due to the demand-supply mismatch. Overall, these factors mean modest price increases make sense for Hyundai.

Conclusion In summary, Hyundai is expected to take a twin approach of prudent cost reduction and tactical price hikes to tackle inflationary pressures. The aim will be to protect profitability without dilution of brand equity. The company has leveraged its scale and supply chain strengths to handle input cost volatility in the past. However, as macroeconomic uncertainty persists, Hyundai will need to make agile moves while strengthening customer value perception about its products.

(Disclaimer : The above Press Release is provided by HT Syndication and PTI will not take any editorial responsibility of this content.).

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)