Price rise and its effect on premium & mass consumer goods

With input prices soaring, ET reports that car prices are likely to increase 2-3% in the next few days. Premium cars will cost Rs 14,000-16,000 more and entry-level cars will be dearer by Rs 4,000-6,000. Maruti Suzuki India is currently working on the price strategy so that the burden on the customer is minimum.

Ditto is the case with mobile phones. Inflation is taking a toll on sales of mobile phones. ET reports that, retailers say that the demand for cell phones has dropped dramatically in the past one month. Retailers point out that though a substantial part of the total consumer spending consists of electronic products, especially cell phones, the rise in prices of other products has negatively affected this category.

From the consumer's perspective, purchases will be put off, till prices ease. The burden of increased prices are going to affect mass consumers more than those consumers who can afford premium products. Therefore it would be interesting to the see the impact of a Rs. 16000 price rise on sales of premium segment cars vis a vis a Rs. 4000 increase on the compact category ones.