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Last Updated : Nov 14, 2017 01:46 PM IST | Source:

Car, bike buyers should brace up for price hikes in January

Three of the top five automakers - Maruti Suzuki, Tata Motors and Mahindra & Mahindra – have signaled that price revision could be on the cards if commodity costs do not ease out before end of this quarter.

Swaraj Baggonkar @swarajsb
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Prices of essential metals such as steel, copper and aluminium have headed north in the past few weeks forcing automotive companies to relook at a price hike at the beginning of 2018.

Three of the top five automakers - Maruti Suzuki, Tata Motors and Mahindra & Mahindra – have signaled that price revision could be on the cards if commodity costs do not ease out before end of this quarter.

With pre-festive period sales bringing a bonanza and consumer sentiment expected to pick up momentum in the last quarter of the financial year, car and two-wheeler makers are confident about the market absorbing the price hike.

Ajay Seth, Chief Financial Officer, Maruti Suzuki India, said, “We believe that commodities are likely to go up from these levels. We already have seen certain trends in a few commodities like copper etc., where we have seen a rising trend. In steel, which is the a major commodity, so far we have been able to maintain price for the first half but we are likely to see some increase in even steel prices in the second half.”

“So we will have to see how it is stabilized but if the trend is what it is at this point in time then the impact could be bit steep and also we have to watch where the steel prices get settled because that is almost half the commodity that we deal with. But especially things like lead, copper, zinc everything has gone up from the previous level. Just to give you an indication, the commodity prices from last year till now have risen by almost 200 basis points”, added Seth.

A price hike is a mixture of a variety of factors such as competitive scenario, discount levels, inventory levels, commodity price trends and, most importantly, the ability of the market to absorb the hike. For instance, on the back of a good monsoon rural demand has picked up for the car market leader Maruti Suzuki to the tune of 22 percent.

When asked if Maruti Suzuki will raise prices Seth added, “We will have to internally review (it). Our first endeavor is always to look at our own internal efficiencies before taking a call or any increase”.

Tata Motors, the country’s fourth largest car maker, too has cautioned of a revisit to its prices after the end of this quarter. So far the Mumbai-based company has raised prices of only commercial vehicle to the tune of 1 percent in October.

“We will have to see what the market trends are after the end of this quarter. It is true that raw material prices have started to firm up. With the pick-up in rural demand, Seventh Pay Commission and the general rise in buyer sentiment we are reasonably confident that the market should be able to absorb price hikes,” said a top Tata Motors official.

For Mahindra & Mahindra the company brought a price hike across tractors and passenger vehicles once since start of this year. Though it has not committed itself to another hike as yet company officials have said that a price rise may have to be carried out in the last quarter.

Pawan Goenka, Managing Director, Mahindra & Mahindra said, “Commodity price increase has been in the order of 2.5 percent for tractor and 1 percent on automotive. We have more or less passed on completely for automotive since April. We will be completing the price hike on tractors in a month or two. Price increase depend on the dynamic situation. We keep looking at input cost increase and competitive scenario”.

Meanwhile home-grown two-wheeler makers Bajaj Auto and TVS Motors, too, have signaled that a price hike is inevitable in January.

K Radhakrishnan, President and Chief Executive Officer, TVS Motors, “Some firmness in commodity prices is there. We might take a price increase in this quarter and the next quarter”.
First Published on Nov 14, 2017 01:46 pm
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