NEW DELHI: The ride is set to get bumpier for car buyers. For the third time this year, car prices are slated for a mark up. According to carmakers, the two hikes this year were too small to counter the rapid rise in raw material costs. Prices are expected to increase by up to Rs 5,000 for mid-segment cars and up to Rs 12,000 for the bigger saloons and SUVs.
Besides the recent spurt in input costs, the industry is trying to protect its margins to maintain profitability and rationally absorb the recently-imposed specific excise duty of up to Rs 20,000 on all vehicles above 1500 cc.
Honda Siel Cars India has already raised prices of City by Rs 15,000, Civic by Rs 20,000 and the newly-launched Accord sedan by Rs 30,000.
Mahindra & Mahindra president (automotive sector) Pawan Goenka told ET: “Clearly, nobody has taken the quantum increase of input prices. The basic increase in raw material prices is over 30%, while car prices have gone up by mere 3-4%. It is not off-setting the entire impact and will be hitting our bottomline. We have no choice but to pass on the burden to customers.”
General Motors vice-president of corporate affairs P Balendran said: “Going forward we shall review prices of our cars. We are evaluating the impact of the massive increase in input prices to take a firm decision.” The Maruti spokesperson said the company would decide on the issue after analysing the market scenario.
Increasing raw material cost is forcing the automobile industry to continuously review its prices and go for regular hikes. Car prices were increased in January by 3% followed by another hike in May-June when prices went up by up to 4%.
Now, carmakers say they are forced to go in for another increase as they are paying more for materials like aluminium, nickel, copper, steel, plastic, glass and tyres. The average cost of raw materials, as a percentage of net turnover in a vehicle, has gone up to over 74% from 69% two years ago.
Toyota Kirloskar Motor India managing director Hiroshi Nakagawa said: “There has been constant pressure on our costs. The increase in prices of all major materials like plastics, alloys and steel are forcing carmakers to bring down costs and cut unnecessary expenditure. But there is a limit to these cost reduction measures and value engineering.
To absorb the increase in input costs, we are looking for a price hike, which is yet to be decided.”
The major increase in input costs is coming from steel, which is up by Rs 13,000 per tonne, chrome-moly steel is up by Rs 3,200 per tonne, tyres have gone up by Rs 2,000 per vehicle, plastics are up by Rs 1,800 per tonne in the second quarter of April-June over the January-March period.
According to industry sources, the rising cost of fuel used in various applications in the automobile sector has also increased energy expenses forcing component makers to ask for higher prices.
“We are also increasing prices of our component supplies to carmakers as raw material costs have doubled in the past 15 months. The price rise is inevitable, given that raw material prices have risen so much. All carmakers are going to increase prices. It’s a question of time,” said a Delhi-based component maker.
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Car prices may set you back again- Automobiles-Auto-News By Industry-News-The Economic TimesYou can't blame them, the inflation hitting an all time high of apprx 12%, input costs rising, Govt not willing to lower its taxation structure for cars which was always high and not to forget the Road Tax which is a major source of revenue and at highest %age in some states.
Instead of developing a good infrastructure and public transport, the govt is taking the consumers for a real ride.
The car companies have to run a business, dont they.
It would be interesting to see how 2008/2009 spans for the auto industry in India. They have enjoyed fantastic growth for many years. The combination of inflation, higher fuel prices and higher car prices all should have an impact, surely?Which players will survive and which ones will suffer?
I wonder why the government cant reduce the taxes. Recently there was hike in excise duty as per the price of the car. What was that for ? Wasnt that an illogical move ? And then this is because of the inflation that can be atleast controlled.
The problem of India is that buying and maintaining a vehicle is not a joke and to make matters worse, there is no proper public transport system.
The common man ends up spending of vehicle and the costs are increased by poor infrastructure.
