Buying a vehicle soon? Prices may rise as new rules kick in
Analysts, though, are more concerned about two-wheelers than trucks, which can manage the cost by adjusting freight rates.
New Delhi: Buyers planning to buy an automobile–from a two-wheeler to even a truck–may have to brace for higher prices soon. New government regulations, including mandatory AC cabins for trucks and a likely anti-lock braking system (ABS) for all two-wheelers, are set to drive up manufacturing costs that may be passed on to consumers, according to industry captains and analysts.
Further, a rise in input prices of key raw materials such as aluminium, and a global squeeze on rare earth magnets is adding to the pressure, leaving industry leaders and analysts to predict a potential wave of price hikes across autos, especially two wheelers and commercial vehicles (CVs) like trucks. To be sure, prices of cars, which have already been increased in recent months, are not expected to rise further.
The trend comes on the back of a lukewarm auto market last year. In FY25, heavy- and medium-duty truck sales declined 4% to 307,491; passenger car sales grew 2% to 4.3 million units; and two-wheeler sales grew 9.1% to 19.6 million units, according to data from the Society of Indian Vehicle Manufacturers (Siam).
Trucks are mandated to be manufactured with AC cabins from 8 June, leading Sanjeev Kumar, president for medium and heavy commercial vehicles (CVs) at Ashok Leyland to say that this might lead to an estimated price hike of 1-1.5% depending on the model.
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On the other hand, Tata Motors’ expects the price hikes to be lower for its trucks. “Cost increase in percentage terms will be lower or minimal for heavy commercial vehicles because the base cost is more there," the company’s executive director Gireesh Wagh told analysts during an earnings call on 13 May. “So, the cost impact on the biggest vehicle could be somewhere around 0.5-0.6%. The cost impact for a, say, intermediate light commercial vehicle will be slightly higher, could be in the range of 1% to 1.2%."
Analysts, though, are more concerned about two-wheelers than trucks, which can manage the cost by adjusting freight rates. A report fromThe Economic Times noted that the Union road ministry may make it mandatory for all new two-wheelers to have ABS (anti-lock braking system) technology from January 2026. ABS is a safety technology that gives drives more control of the vehicle while braking, especially on slippery roads.
Currently, only vehicles above 125cc engine level have ABS, which constitute about 16% of the country’s two-wheeler market. So, the remaining 84% of the two-wheeler market could see a ₹3,000-5,000 price hike for single-channel ABS.
According to a 20 June report by analysts at Kotak Institutional Equities, this could result in “further pressurizing entry-level motorcycle segment demand and halting the scooter segment’s momentum".
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To be sure, according to Siam data, even while sales of motorcycles overall grew 5.1%, data compiled by Kotak Institutional Equities showed bikes in the economy segment witnessed a decline of 8% in sales as compared to FY24.
Further, of the 9.1% growth that the overall two-wheeler market registered in FY25, scooters contributed 17%, while motorcycles contributed just 5.1%, bringing down the overall industry growth.
Other pressures
Meanwhile, headwinds on the raw material front are adding to the pressure, especially rare earths and aluminium.
China has restricted exports of rare earth magnets, of which it has a globally dominant share. Even if the auto firms manage to get their hands on the component, prices of rare earth magnets, particularly neodymium and praseodymium, have increased over 13-17% over the past six months, as per Axis Securities.
Also read | India’s top rare-earths producer IREL is headless amid mounting supply risks from China
Aluminium prices, too, are a concern. “Aluminium LME prices are up from ~$2,100/tonne in early 2024 to ~$2,500/tonne in June 2025, leading to ~12–15% higher input costs for domestic auto-grade aluminium," Shridhar Kallani, research analyst for auto at Axis Securities noted.
“A sustained inflation in key raw materials, combined with the weak INR, may result in gross margin pressure of 30-70 bps, depending on product mix. While long-term supply contracts and hedging offer some insulation, full pass-through to customers will be a delicate balancing act in the current demand environment," he added. One bps is one-hundredth of a percentage point.
The contrarian view
However, some experts and even automakers, especially of passenger vehicles, are not overly concerned.
“While aluminium prices have increased, it is still lower than what it was pre March. Unless there is another 10% increase, it is unlikely to be of major concern," Subhabrata Sengupta, partner at Avalon Consulting said. “For rare earths, the impact will be model specific and driven by availability issues; rare earths account for hardly 5-6% of the cost, so cost impact is unlikely to be substantial."
As for car makers, Maruti Suzuki India Ltd, Mahindra and Mahindra Ltd, Tata Motors Ltd and Hyundai Motor India Ltd have already implemented price hikes in 2025 so far in the range of 1-4% across their models. And with the car market expected to grow by just 1-2% in FY26, observers indicate that another round of price increases is unlikely.
Addressing reporters on 24 June, Tata Motors Group CFO P.B. Balaji said the country’s automakers have learned to manage their supply chains better after dealing with disruptions in recent years.
“In a scenario where demand is under stress, sustained inflation is unlikely…I am not in the camp of saying there is going to be structural inflation," Balaji said on the question of whether there is likely to pressure on costs of automakers due to global instability from multiple developments like Trump tariffs, West Asia crisis and the rare earth magnet crisis.
Requests for comments from other automakers remained unanswered till press time.
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