By Suveen K. Sinha

If you're a four-wheeler-aspirant whose time, for the past three weeks, has been exclusively devoted to an orgy of self-congratulation for waiting till prices actually dipped-they did, by between Rs 10,000 and Rs 40,000, post the reduction in excise duty announced in the budget-here's a tip for you: buy that car before the summer is out or you'll end up a loser.

Manufacturers are already deliberating upon the opportune time to increase the prices of cars at least half-way, if not all the way, back to pre-budget levels. Some auto-industry executives who've sat in on these meetings say companies may announce a price-hike in late April or early May (which will come into effect in late-May or early June).

Indeed, one meeting between two competing car-makers on the timing of a price-hike happened right after the budget. April 3, 2001, and April 8, 2001, were the two dates discussed by the companies, but the meeting ended on the note that upping prices a month after slashing them wouldn't 'look nice'.

So, why did these companies cut prices in a hurry? The manufacturers were under pressure to be seen to be doing something for the consumer. Anupam Majumdar, who tracks the automotive sector for Delhi-based rating agency ICRA, also cites peer pressure as a probable cause: ''If your competitor is doing it, you have to do it too.''

Given the fact that the sale price of only a few cars-primarily the older ones in the Maruti stable and Hyundai's Santro-covers the cost of their manufacture and only just (upgradation focused at making these vehicles meet Euro II emission norms proved expensive), the 8 per cent reduction in excise was an excellent opportunity for car makers to improve the health of their balance sheets. That apart, the global prices of key inputs have been on the rise. Why, one manufacturer was planning to raise the price of its cars in some markets but, caught unawares by the excise cut, ended up doing the opposite.

The early-March price cuts may also have been experimental in nature. ''We first have to wait and see how the market responds to the price cuts,'' says the chief executive of one car company. That is crucial for an industry plagued by overcapacity: the total installed capacity for manufacture of passenger cars in India is about 11.5 lakh against the total sales volume of about six lakh; and the car market is set to shrink by around 3 per cent this financial year. Venu Srinivasan, the President of the Society for Indian Automobile Manufacturers, believes the price cuts will result in a positive growth of at least 5 per cent in the next financial year.

June, 2001, then, could be the right time to increase prices: by then the market would have gathered some momentum thanks to the price cuts and the reduction in interest rates. Says Abhay Kantak, an automotive analyst with the Mumbai-based Motilal Oswal: ''A lower interest rate regime means lower financing cost on purchase of cars. Besides, it could also lead to economic growth that will boost demand.''

That, though, lies in the future. Right now, most car manufacturers are still ruing the fact that the entire excise-reduction had to be passed on to the consumer. And while they agree that it will be impossible to go back to the earlier levels in the near future, they are keeping their eyes and ears open to find out who makes the first move.

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