Car prices may be hiked owing to sharp depreciation in rupee

The falling rupee value against the dollar is a cause of major concern among the carmanufacturers today. The rupee stood at 52.32 on Tuesday to mark a 15% depreciation in the last two months. Until few days back, the car manufacturers were against increasing the prices of their car models despite high inflation in the market leading to higher input costs. However, the further depreciation of the rupee value has forced the auto majors to re-think on their decision. Toyota India for example, which has reinforced the hike up to 1.5% just in October is once again mulling to implement a price hike in January. Soon, Maruti India, Honda India, General Motors are expected to join the bandwagon to cut down their losses.

Country’s leading car manufacturer, Maruti India last week hiked the prices of the diesel cars up to Rs 10,000. Maruti Suzuki India CFO, Ajay Seth without getting into details, informed that the company is facing losses due to the rupee depreciation. A low rupee value impacts an auto mobile company especially during the imports. They end up paying more capitals while importing the essential components based on the exchange value. Maruti Suzuki India for instance handles the imports worth Rs 8,000 crores. The losses are nevertheless, recovered back through exports. But according to Ajay Seth, on an overall, the MSI still suffers a marginal loss, which can be made up for only by enforcing a price hike.

On the other hand, P Balendran of General Motors, speaking on behalf of the company, had said that they might be considering an increase in prices of Chevrolet Spark, Chevrolet Aveo, Chevrolet U-VA and Chevrolet Optra models. The powerplants for the above mentioned models are imported from other parts of the world resulting in higher input costs. Just earlier this month, he had remarked about the possibility to carry on with the current prices. The luxury car manufacturers are most likely to be affected by the falling rupee. Global auto giants like Audi survive in the country with their units imported as Completely Built Units (CBU). Their profit margins are largely dependent on the rupee conversions against Euro and dollar. Based on the current conditions, looks like the car price increase is imminent sooner or later.

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