Maruti Suzuki, India’s largest carmaker, is set to raise prices for the fourth time in 2021. The company will increase prices of its models in September to offset the continuous jump in commodity prices like steel and copper. The hike also comes at a time when the industry is gearing up to welcome the festival period which starts with Ganesh Chaturthi on September 10. Moneycontrol spoke to Shashank Srivastava, Senior Executive Director, Maruti Suzuki India.
Q. What will be the quantum of the hike?
A. We are yet to determine the quantum of the hike. We are still working out the price details. We hiked prices in January by 1.4 percent, in April it was 1.6 percent and in July we did not have a hike across models but we increased it only on some CNG vehicles which was roughly 0.4 percent. We have done a total of 3.4 percent since January. We have not finalised the quantum for September but it appears to be a substantial one because commodity price continues to be very high.
Q. Does ‘substantial’ hike mean around 2 percent hike?
A. We cannot compromise demand too much either. While the need for a hike is much higher, we are conscious not to compromise the demand revival. So, we will walk that fine line.
Q. Will it be an across-the-board hike?
A. Yes, the hike will be across models.
Q. What will be the effective date of the hike?
A. It will be September and we will make it effective as early as possible. Since there is a process of approval from the finance department, we cannot reveal the exact date as of today but it will be soon.
Q. Why is there the need to hike prices when demand still hasn’t stabilised?
A. For OEMs (original equipment manufacturers) roughly 70-75 percent is material cost of the total expenses. Steel which was Rs 38 per kg it has gone up to Rs 65 per kg. Copper which was $5,200 per tonne in May 2020 rose to $10,200 per tonne in July. Then due to BS-VI emission norms the consumption of precious metals like Rhodium and Palladium went up and with that its prices also went up greatly. Rhodium which was Rs 18,000 per gram in 2020 went up to Rs 64,000 per gram.
Q. Have we hit a peak in raw material costs?
A. The general consensus says that there will be softening in Q3 and Q4. But the softening will not be much. We could not take price hikes last year because of weak market conditions and we were more focussed on demand revival. We were hoping that commodity prices will soften going ahead and thereby taking a temporary hit but unfortunately the prices have been adamantly high for more than a year.
Q. Do you think such price hikes will hit demand?A. The market won’t absorb the hike easily but the demand pattern reflected in booking and retails seem to be positive and we are hopeful that even with the price hike the demand will continue to remain steady.