Automotive sector all set for price revision

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SummaryA weak rupee and a bullish dollar has set alarm bells ringing across the already troubled automotive sector in the region

A weak rupee and a bullish dollar has set alarm bells ringing across the already troubled automotive sector in the region. Companies will inevitably have to raise their prices due to an increase in the cost of production as well as raw material.

Skoda India announced its plan to increase prices across its product range on Monday. “The price rise is primarily due to the depreciation of the Indian rupee by almost 10 per cent against the US dollar. Prices are expected to go up next month,” stated an official communique of Skoda.

Volkswagen Group admitted that their business has taken a hit. “Around 30 per cent of the components used to manufacture products at the Pune Volkswagen plant are imported and the depreciating rupee has directly impacted us. We are trying to reduce the impact with additional export activities,” a spokesperson said.

Plagued by a low demand, the automotive sector in Pune has been going through a slow phase in the past few months. Anant Sardeshpande, director-general of Mahratta Chambers of Commerce Industries and Agriculture (MCCIA), pointed out how the industry has a “multiplying effect of five” - and how the effect will spill across the industrial belt. This would be especially disastrous for over 7,000 small and medium scale industries in Pimpri Chinchwad area.

“The linkage for the automobile industry goes right down to the lowest supplier, who will now be affected. As a thumb rule, it is expected that if the core automobile industry employs one person, the ancillary industry provides employment to five. This gives an idea about the number of people who would be affected,” he said.

“Fuel price will also be hit thanks to a weak rupee,” he said. The low demand for automobiles has been accentuated by high fuel prices, something that has become a bane for industries in general.

While those lower in the chain are already feeling the effect of the slide, big players too are adopting a cautious attitude. Eberhard Kern, MD and CEO, Mercedes-Benz India said, “The slide of the rupee is a worrying sign. We have a long term hedging strategy and are not considering any immediate short term measures. We are closely monitoring the developments and will consider a revision in pricing for specific models if required.”

PARTHA SARTHI BISWAS

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