Car prices set for 2-phase hike in 2010.

Carmakers are gearing up for a two-phase price hike after almost a year, thanks to increasing input costs and the need to switch to switch to stricter emission norms from April next. Prices of popular vehicles such as Mahindra Scorpio, Maruti Swift and Honda Civic may go up by Rs 10,000-20,000 within a month or so as the raw material prices have gone up by 10-15% and also the Japanese carmakers are concerned by the rise in yen valuation. “We are facing pressures to increase prices to keep our profit margins in healthy territory,” said Pawan Goenka, head of the automotive division at Mahindra & Mahindra. “Steel and other major metal suppliers are pressing for price increase from for some time. We’ll try to absorb it but some may have to be passed on to the customers,” added Mr Goenka who is also president of the Society of Indian Automobile Manufacturers’ (SIAM). Maruti Suzuki, which is currently negotiating its supply contract, is expecting its raw material costs to be 5-7% higher in the secong half of the fiscal than the first half. “We are currently negotiating prices and final negotiations are yet to be concluded,” said S Maitra, Maruti’s managing executive officer (supply chain). Maruti and other Japanese carmakers such as Honda and Toyota are also keeping a tab at the recent fluctuations in the Japanese currency, which is at a 14-year high. A stronger yen will increase the import bill of these companies, which may lead to higher ex-showroom prices of imported vehicles like the Suzuki Grand Vitara and Honda CRV. “The recent changes in the Japanese yen is a cause of concern. If it continues unabated we will have to consider some price variation though nothing immediately is on the cards yet,” said Jnaneshwar Sen, vice-president (marketing) at Honda Siel Cars. These companies, however, may put off the price rise till the next year as carmakers traditionally offer high discount in December to clear off year-end inventories. Prices of cars were last hiked in January last. It will be followed by a second round of price hike before April, 2010, when stricter Bharati Stage IV norms will be applicable in big metros and Bharat Stage III in rest of the country. Each car upgrading to these norms will need an investment of Rs 5,000-15,000 on technology. The cost will be higher for bigger vehicles such as trucks and buses. Under the new norms, all the cars sold in 11 major cities including Delhi, Mumbai, Chennai, Hyderabad and Bangalore, where over 65% of the new cars are sold, will switch over to the new BS IV emissions, while the rest of India will upgrade to the BS III norms.
SUDEEP SINGH
PGDM III SEM
SEC-B