10 Reasons why vehicle prices have gone up 1.5-2x in past 5 years? - eNidhi India Travel Blog

10 Reasons why vehicle prices have gone up 1.5-2x in past 5 years?

 Vehicle prices in India have gone up significantly. Consider these examples:

  • TVS Apache RTR 160 I had bought in 2016 was costing me 79k INR on road in Chennai. Today a 160 cc bike costs about 1.5 lakhs onroad.
  • TVS XL super was costing 44k on road last year in Udupi, now costs about 55k (I had paid about 22k for TVS Sport in 2001)
  • Tata Tiago XT Petrol was costing 4.91 lakhs on road in Chennai in 2016. Now 5.8 lakh is its ex-showroom price, on road is close to 7 lakhs.
What is driving vehicle prices up? Why have bikes become almost 2x more expensive within 4-5 years and cars almost 30-50% more? Here're the reasons
  1. BS6 Engines: Government mandated BS6 engines from April 2020, within 2 years of mandating BS4. So auto makers had to invest in this new emission norm- new accessories, technologies and R&D effort. All these has to be recovered from people who buy the vehicles, so vehicle cost has to be increased. Hopefully in 2021 once automakers recover their investment they may reduce retail price a bit. On a positive side we now have more eco-friendly engines, which are also said to be a bit more fuel efficient (need to be verified).
  2. Inflation: Things get expensive over time. Petrol was 30 Rs a liter when I was studying Engineering 19 years ago. Gold was INR 1400 per gram 15 years ago. 100 gram, 10 Rs maggie noodle now costs 12 Rs for 60 grams. Your salary also would have gone up over time. It is natural for things to get expensive.
  3. More safety features, mandated by Govt: Govt has mandated ABS for all bikes above 125cc. Driver airbag is mandatory in cars now. These features cost money so price had to be increased.
  4. More general features: Consumer demand and expectation has increased. Sunroof is now available in 10-15 lakh cars. DRLs, climate control and several other features once available only in super expensive cars is now available in small cars, sedans and compact suvs, mostly in their top variants, increasing their price. Among bikes mono suspension, digital console, blutooth connectivity, rear disc brake, FI etc have become common.
  5. Diesel policy and pricing mess: a decade ago, diesel was lot cheaper, so many car owners who had to drive 50+ kms per day preferred diesel cars. Car makers invested lots of money to introduce entry level diesel cars. But soon diesel price increased and now both petrol and diesel cost almost same. Those huge investments made are not resulting in large number of sales. Thus car makers have to recover it partly from petrol car owners as well.
  6. Increased insurance cost: Insurance companies have increased their premium. Last year one had to buy 3-5 year premium. Now you can buy for one year. Still with bumper to bumper, zero depreciation and other schemes, insurance companies manage to extract more premium. Govt mandated part is only 3rd party liability insurance. 2014 I had paid 1400 INR for 3rd party liability+ own damage cover for my bike. Now it costs INR 1700+ just for 3rd party liability cover+ mandatory accident cover.
  7. Fast Tag: Car dealers are selling fast tag sticker for 600-1000 Rs per car. You can avoid it if you hardly use toll booth or comfortable with cash lane.
  8. Corona: Because of corona, people are preferring own cars and bikes instead of public transport. With this increased demand, OEMs do not feel any need to give discounts or reduce prices. Once the Corona influenced vehicle buying craze stops may be the sales pressure will kick in again and automobile companies will reduce prices a bit- we will have to see.
  9. GST Regime: Tax regime has also had an impact. Cars attract 28% GST. There is extra tax for cars above 10 lakh, cars above 1.5 litre engine, cars longer than 4 meters, CBU/CKD and so on. So tax change is also a reason for high prices. Last year after low sales auto industry asked govt for lower tax but Govt didn't budge. Nirmala Sitaraman said industry is affected because youngsters are using uber and Ola and her solution was that she will ask Govt departments to buy more vehicles.
  10. Increased customer awareness and options: I think car makers and dealers are forced to increase price because they can't cheat customers more during after sales service. Customers today are well aware of vehicle mechanics, well connected online to discuss an issue and find right solution, have too many options (different service providers for insurance, service, accessories etc). Few years ago Mandovi motors trying to cheat a customer by simply returning his car after a wash instead of detailed service got recorded in dash camera and got lots of bad press of Maruti. Hanuman Motors in Udupi had to be closed down due to fraudulent practices. With CCTV in workshops, digital tracking of inventories and customers capable of fighting back, cheating a customer is more difficult and risky today. Thus car makers have to make max profit from initial sales.
Arun has provided another point- Indian consumers are now more demanding, upgrading their cars more frequently and have financial power to spend more. Thus a car maker providing good cars and service can command higher price and doesn't have to go to deep discounting to sell cars.

What are your thoughts? Is your vehicle purchase plan held back because of increased pricing? Are you preferred second hand vehicles instead?


  1. Good analysis. One more reason can be the customer buying pattern. Like mobile phones, people are upgrading to a better car every few years unlike in the past when they used to drive a car for 15 years and more


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