Rupee depreciation, rising steel prices may lead to hike in vehicle prices

30 October 2008

New Delhi: Carmakers like Maruti Suzuki, Honda Siel, Mahindra & Mahindra as well two-wheeler companies are planning to raise prices in response to rising steel prices and the falling value of the rupee.

Auto manufacturers say they have been hit on account of wildly fluctuating steel prices and those who had signed annual contracts now find their top suppliers demanding higher prices.

Moreover, the rupee depreciation has also made imported steel costlier.

Maruti Suzuki recently increased its prices by Rs2,000-Rs6,000 to absorb rising input costs as its major supplier Nippon asked for a 22 per cent price hike for new contracts. Others like Tata Steel are also seeking higher prices.

Industry sources say steel comprises the largest part of the commodity needs of carmakers and while there has been a softening of the prices of other hard commodities like nickel, lead, aluminium etc, which are needed in smaller quantities, there has been no real fall in steel prices.

Also the crux of the problem is that the price of high grade value-added steel just refuses to fall. While there has been some fall in the spot prices of steel, high-grade auto steel has actually risen.