Passenger cars are set to become costlier. Major car manufacturers are mulling to hike prices by 2%-3% anytime in April to counter the impact of rising costs of inputs which has hit the bottomline of all auto companies.
If the hike is implemented, it would be by anything in the range of Rs 5,000 – Rs 35,000 depending on the model. According to industry estimates, prices of steel have gone up by 27% between January and April 2008.
?A price hike of 2% – 2.5% is inevitable as the bottomline of major manufacturers are expected to be affected by around 3% for the year ending March 31. However, the process may be in phases as companies are set to renew their long-term contracts with effect from April 1 for steel and other raw material that go into making a vehicle,? said Arvind Jain, investment officer, BanyanTree Finance.
?The impact on the bottomline could have been worse, anything around 8%, had it not been for reduction in excise duty and huge investment on research and development (R&D) by major auto manufacturers to lower input costs,? opined Jain.
?Firms like Maruti Suzuki India Ltd and Tata Motors have been investing huge amount in R&D to bring down the overall cost by 1%-1.5% as it would help neutralise the impact of rising prices to a small extent,? added Jain.
?In anticipation of a price-hike in the near future, dealers have actually increased the inventory to widen their margins,? said an industry expert who added that though the hike was expected in the first week of April, companies delayed the revision of prices as volumes refused to comply.
Industry experts and analysts, however, are optimistic that the hike would not be more than 3%. ?The Indian auto industry is highly competitive and firms will not let their marketshare slip even if it means absorbing high input costs to an extent. Moreover, with growth slowing down since 2007, volumes are already under pressure,? explained a Mumbai-based analyst.
