Auto industry weighed down by forex pressure as rupee depreciates

With the rupee weakening against the euro and dollar, luxury and mass-market automakers are preparing steep price hikes as rising import and semiconductor costs squeeze margins

India’s auto industry, especially the high-end and luxury cars, are suffering from forex pressure as the Indian currency depreciates against both the US dollar and the euro. 

Most of the luxury cars are imported from Europe, either in completely-knocked-down (CKD) form and assembled in local plants, or are imported as completely-built-units (CBUs). 

With the rupee sliding vis-a-vis the Euro by almost 15 per cent year-to-year, the luxury original equipment manufacturers (OEMs) are feeling the pressure. 

Speaking to Business Standard, Santosh Iyer, MD & CEO, Mercedes-Benz India, said, “The buoyant effect of the price drop on demand for luxury vehicles may not continue in the coming quarters, as the price of luxury cars will eventually rise from their current levels, due to depreciating forex movements among other factors.” 

Iyer added that they will be “forced” to adjust the pricing, and are mulling a price correction from January 2026 for its model range to offset the rising cost pressures.

 

Another German OEM too confirmed that they are also contemplating a price hike from January, and are working on deciding the quantum of hike.

 

Mercedes has taken three price hikes so far during the year due to forex rate fluctuations and rise in input costs.

 

Industry insiders explained that makers have passed on the GST rate rationalisation benefits entirely to customers, leaving them with little headroom to manoeuvre cost pressures. Price hikes were kept at bay for a few months, but most brands would take a call early 2026 on pricing. 

 

Mass market OEMs too are impacted thanks to the currency sliding against the US dollar.

 

Almost 95 per cent of the semiconductor chips that go into cars (especially the higher end cars which have more electronic features) are imported from countries like Taiwan, China and South Korea.

 

The expensive dollar is hurting margins, admitted an industry insider, who added that people are in a wait-and-watch mode before price hikes are announced.

 

“Around January most mass market OEMs too will announce price hikes for sure. People would not be able to absorb the USD-INR depreciation impact fully,” he said.

 

Auto OEMs typically import microcontrollers (MCUs) and microprocessors (or the central "brains" of various electronic control units (ECUs) in a car, managing everything from engine performance and braking systems to advanced driver-assistance systems (ADAS), Power Management Integrated Circuits (PMICs), Memory and Storage Solutions (used for navigation systems, infotainment data storage, and firmware for control systems), Radio and Entertainment Chips, Power Electronics (crucial for efficient power conversion in EV batteries and motors) apart from other sensors etc.