As steel, aluminum and precious metal prices soar, so will passenger and commercial vehicle costs
A 48 percent increase in steel prices puts automakers in India in a quandary. This sector has already faced the brunt of an earlier slowdown in 2019 and onslaught of the COVID-19 pandemic in 2020 and are slowly just emerging out of the red only to be faced with component shortage. However, more worrying is the fact that steel prices are on the increase and this will result in a second round of price hikes by auto companies in India.
Auto majors have announced, that rising raw material costs will push up pricing by anything between 1-3 percent. The auto industry has raised the issue with various ministries seeking intervention as passing on this increased price to consumers will have a devastating effect on the market. Car companies have already increased prices this year by up to 3.5%.
Rising Steel Prices
Steel manufacturers in India have increased prices twice in Q3 where forging quality steel is concerned and thrice during the October to December 2020 period for other types of steel. Siddhartha Lal, MD, Eicher Motors has stated that the company will have to increase prices again from April 2021. Similar sentiments were expressed by Gopal Mahadevan, CFO and Director, Ashok Leyland.
The truck market is just about seeing some positive demand. The company had increased prices in Oct 2020 and again in Jan 2021 but with the rising prices of steel, there will be no other recourse than to hike prices once again. However, the company is hopeful that the price increase will be absorbed by the market.
The truck segment had only recently seen a significant price hike following the upgrade from BS4 to BS6 norms causing the truck industry to slump 54 percent during the April to December 2020 period. Mahindra also expects the hike in steel and raw material prices to relate to an increase in prices of both commercial vehicles and SUVs, but expects the shortage of semi-conductors, which the auto industry also has to contend with, to ease by June-July 2021.
Price Hikes in Jan-Feb 2021
Several leading automakers in the country have increased prices across range in the past two month. Maruti Suzuki increased prices by upto Rs.34,000 while the Hyundai range underwent a price increase upto Rs.45,000. Mahindra also increased prices by anything between Rs.23,000-42,000 as did Renault India by upto Rs.45,000 while price hike announced by Tata Motors was upto Rs.26,000.
Along with rising costs, the Industry is also bogged down by rising fuel prices. Petrol and diesel prices once again increased the seventh consecutive day on Monday. The pump price of diesel increased by 0.29 paise per liter and petrol by 0.26 paise per liter in the Capital.
The past seven days has seen the price increased by Rs 2.06 per liter for petrol while diesel rate has risen by Rs 2.56 a liter. This recent price hike now sees diesel priced at Rs.79.35 per liter and petrol at Rs.88.99 per liter.