The auto industry has been battling the upward curve of raw material costs over the last few months but if the trend continues, the OEMs would have no other option except increasing the car prices in India. This would impact the festive season marketing to a considerable extent.
Over the last 6 months alone, steel price has increased 36% while price of natural rubber which had been witnessing steady slide for the last 3 years gained 25%.
Other essential automotive raw materials like aluminum and copper are also getting dearer by the day. The increase in input costs has been affecting both passenger and commercial vehicle manufacturers.
The impact is even worse for Japanese automakers since the appreciation of yen is proving to be a dampener. Import of components from Japan has become more expensive than before.
Already automakers like Honda Cars India and Volvo Eicher Commercial Vehicles have increased the prices a bit last month. Further price increase is not ruled out either. OEMs like Hyundai and Mahindra too are feeling the pinch of the rise in input costs, and have hinted that a price hike is in the offing for the festive season.
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For customers, the trend means more expensive vehicles and less festive season discounts/offers. Automakers are expected to increase the prices only to partially offset the rise in raw material costs which means they would suffer a pressurized profit margin even if sales continue unaffected.