Price hike will help protect, maintain margin: M&M

Q: Tell us about the 2 percent price hike undertaken and is this sufficient to cover cost inflation or would you have to take more price hikes in near future?

A: This price increase is the highest increase. We are not taking it across all products. It varies from 0.5-2 percent. The price increase what we are going to take effective January 1 is to part compensate increases in terms of material, transport and other input costs. So it’s not compensatory and as things stand today we don't talk about whether we'll take in future or not. Looking at the industry dynamics and the market situation, we'll take a call at a point in time. It's difficult to say when we'll take the next price increase.

Q: How will this impact your realizations which stood at Rs 5 lakh/unit in the last quarter?

A: This increase ranges at the customers end from Rs 4000 to Rs 19000 at the highest.

Q: Despite pressure from declining utility vehicles (UV) sales, your auto division margins, in Q2 slipped only marginally to 11.2 percent versus 12.2 percent year-on-year. Where do you see it stabilizing in H2 FY14?

A: Margins continue to be a challenge. I don’t like to talk about where this price increases. It is one element among various other factors. So if I talk about that I am talking ahead of time which I would like to refrain from. But surely the price increases should help us going forward to try and protect and maintain the margins at which we currently are.

Q: What are the average discounts or promotion schemes being offered in the UV segment and is this impacting margins quite a bit as well?

A: Traditionally in the month of December in the personal segment people expect higher amount of schemes and matching that of course the schemes during the month of December are higher versus other months. This year December schemes are surely higher than previous years simply because industry is going through difficult times.

Q: So what is the average quantum of schemes being offered in the next six months?

A: There is no such specific national level scheme. Product to product we have different schemes because we have products that cater to different segments. So vehicles like Bolero, Scorpio which are doing well may have lower offer schemes whereas the other models where competitive intensity is higher, you will see offers matching other brands.

Q: You have recently launched the W4 model of the XUV 500, how are the sales panning out and what could the monthly run rate be?

A: It's too early to talk about W4 but the input what we are getting, people are excited, the enquiry levels are increasing. It is too early for me to say what numbers we've achieved. But the price point that we have come up with for W4, surely we will bring momentum for XUV 500.

Q: You had indicated in your last interaction that demand for auto division has slowed, many analysts are factoring in a contraction in your auto volumes by 6-8 percent in FY14. Do you think that could be a possibility?

A: Looking at the overall economic situation and no steps being taken to provide relief to the industry, I do not see things turning around and it's difficult to predict what would be the yearly degrowth but we are not seeing much respite or relief going forward. So the market situation will continue to be difficult.