Why Mahindra & Mahindra is hiking prices despite sales plunging

Despite auto sales pluging across the industry, Mahindra & Mahindra (M&M), the country's largest sports utility vehicle (SUV) maker has raised prices of its vehicles by an average 0.5 per cent. The hike is on account of increased input costs and will be effective immediately, Mahindra & Mahindra's automotive division chief executive Pravin Shah said on Monday.

Mahindra & Mahindra has raised prices of all vehicles except for the premium sports utility vehicles XUV 500 and the Rexton from its Korean arm, Ssangyong.

The hike would translate into an upward movement in the prices to the tune of Rs 3,000 to Rs 6,000, depending on the model, Mr Shah said.

"We have witnessed a de-growth in month of June amidst an overall decline in the auto industry. The depreciating rupee resulting in spiralling fuel costs coupled with high interest rates and the additional excise duties on SUVs has further dampened the industry without any substantial revenue to government," Mr Shah said.

The rupee tumbled to new record lows last week, making it Asia's worst performing currency so far this year, after remarks from the US Federal Reserve Chairman Ben Bernanke on a rollback of stimulus prompted a sell-off in emerging market assets and capital outflows.

The rupee last week breached the psychological 60 mark against the dollar.

Mahindra & Mahindra has vehicles like Scorpio, Verito, Verito Vibe, Quanto and Bolero in its stable.

Earlier on Monday, Mahindra & Mahindra, said its June sales fell nearly 8 per cent compared with a year ago.

Maruti Suzuki, India's largest car maker by sales also reported a sharp decline in June sales by 12.6 per cent to 84,455 units against 96,597 units in the same month last year.

Auto sales have fallen for the eight straight month.

Mahindra & Mahindra shares ended 1.63 per cent up, in line with the BSE Auto Index which ended 1.85 per cent.

The passenger vehicle segment which includes utility vehicles (UVs) and the Verito sold 17232 units in June compared to 19792 units a year ago.

Mahindra & Mahindra's domestic sales during the month stood at 36207 units against 38951 units last year.

Exports sharply fell 20 per cent during the month to 1,885 units from 2,371.

(With inputs from agencies)