Maruti to increase car prices from Jan as raw material gets costlier

Raw material prices like steel,aluminium, copper and rubber are increasing with the full impact of cumulative increases to be felt in Q3 and Q4 of this financial year

India’s largest carmaker Maruti Suzuki announced this week that it would increase prices of its vehicles from January.

However, the price rise could be more this time as the cost of raw materials has increased significantly.

"Over the past year, the cost of the company's vehicles has been impacted adversely due to increase in various input costs.  Hence, it has become imperative for the company to pass on some impact of the above additional cost to customers through a price increase in January 2021," the company said.

The price hike will vary across models. Maruti’s fleet starts from the entry-level small car Alto and goes up to premium multi-purpose vehicle XL6.

Raw material prices are hardening with the full impact of cumulative increases to be felt in Q3 and Q4 of this financial year. Steel, aluminium, copper and rubber — key inputs for the auto industry — are all headed northwards. Steel is up 30 per cent in 6 months, aluminium is up 40 per cent and copper up 77 per cent since March.

Automakers also do not have much room left to absorb the hike in input cost because of losses incurred in the first two quarters of the fiscal year following the coronavirus outbreak.

Companies had registered zero sales in April and May due to the lockdown induced by the government to counter the coronavirus pandemic.

While Maruti is the first company to announce a price hike, it is expected that other automakers will follow the same. Maruti has more than 50 per cent share of India's auto market.

Price hike from the beginning of the year has become an annual exercise is a tactic aimed at enticing customers to buy before the year-end and clear piled up inventories before the start of the next year, when the value would typically suffer from a sharp depreciation.