car makers prepare for yet another price hike in July

The unspoiled growth momentum which the Indian auto industry has been enjoying since last six months, is now threatened by the yet another possible price hike from major automakers in the country, starting from next month. It is to be mentioned here that this is the fourth time in this year (2010) when car makers have decided to increase the price of their cars in India. The industry, first witnessed the price hike in January due to the increasing raw material cost, following another increase in price in March and April due to an increase of 2% in the excise duty and implementation of new BS-IV emission norms, respectively.

The major contributor to this price hike is a sharp rise in the price of raw materials including steel and rubber. As most of the car makers source steel from foreign markets, its price surges with the weakening currency. During the period of April-May 2010, the price of steel and rubber has increased by more than 20 to 25%.

Companies like Maruti, Mahindra & Mahindra, Ford and Toyota are banking upon robust demand and hoping that a small price hike will not affect the ongoing high sales. General Motors India has already indicated that it is planning to increase the price of its cars in India by 2 to 3 percent from the 1st of July. The company will be increasing prices across all eight models, by 2-3 per cent to offset rising input costs, said company's vice-president Balendran. While Mr Pawan Goenka, president, Auto and Farm Division of Mahindra and Mahindra, has already said that if the commodity prices continue to rise at the current rate, there is no other option for car makers but to increase the price of the cars.