Mercedes is set to raise the prices of its vehicles in the country by 2 percent while Volkswagen is planning to hike prices by up to 3 percent. Both price hikes will come into effect starting January. Both German carmakers join others such as Tata Motors, Toyota, Hyundai, Nissan, Datsun and Renault, who recently announced a similar hike in prices.

Tata is set to hike prices in the range of Rs 5,000-25,000, while Toyota and Renault are both set to hike prices by up to 3 percent across their line-up. Nissan said it will raise prices by up to Rs 30,000, while Hyundai cars are set to get dearer by up to Rs 1,00,000.

Carmakers are citing the rise in input costs, fluctuating exchange rates and increasing operating expenses for raising the prices. The decision to hike rates comes despite the strapped-for-cash customers – particularly in rural India – delaying purchase decisions, including those for new vehicles, due to the government’s decision to demonetise Rs 500 and Rs 1,000 currency notes.

Mercedes-Benz India MD and CEO, Roland Folger, recently said demonetisation has dampened buyer sentiments since there has been a significant decline in footfalls and enquiries at the dealerships. “People are emotionally insecure. Customers are not feeling like going out there and buying luxury items. We have seen less customers coming to the showrooms and it is taking them longer to take decisions,” he said. However, he said demonetisation would not affect the company’s plans for 2017.

For Volkswagen, volume growth has been robust, mainly due to the increasing sales of the Ameo. It registered sales of 4,014 units in November 2016 as compared to 1,942 units sold in the corresponding month of the previous year, up 107 percent year-on-year. Moreover, the carmaker recently announced the introduction of ABS and dual airbags as standard fitments across its model range in India.