Car Companies Maruti, Toyota, GM & Honda may Hike Prices by up to Rs 25,000 on Expensive Imports.

NEW DELHI: Carmakers plan to increase prices by up to Rs 10,000 for small cars and up to Rs 25,000 for sedans to offset the impact of weakening rupee on import costs despite the recent slump in sales.

Maruti Suzuki, Toyota, General Motors, Honda and Skoda Auto all plan to increase prices within days as the weakening rupee has pushed up costs of their imported components significantly, company executives said.

The rupee has weakened about 17% against the US dollar since January, hitting an all-time low Rs 52.73 last week, forcing carmakers - that import between 10% and 40% of components for different models - to consider price increases.

"We will have to pass on the cost to customers to offset the rising impact of depreciating rupee and the rising cost of making diesel cars that are currently selling like hot cakes," a senior Maruti Suzuki executive said on condition of anonymity. Maruti Suzuki, which imports components worth about Rs 8,000 crore annually, is losing 15% of the margins due to rupee depreciation, the person said.

Luxury carmakers such as Audi, which import fully-built models to feed the local market, too are expected to increase prices by up to Rs 50,000. Analysts say price revision could be disastrous in a sliding market. But carmakers may have already cut prices to lowest possible levels to survive in a tough and extremely competitive market, and may not be able to absorb rising costs.

"If competition is coupled with rising input costs, sky-rocketing fuel prices, hike in interest rates and an eventual increase in the prices of vehicles, the consequence is disastrous.

The demand is stymied and manufacturers become mute spectators as they see their unsold stocks pile up at dealerships," Motown India Editor P Tharyan said. "This condition, if it persists, has a nasty effect on the bottom line of companies and can, in extreme cases, lead to a balance sheet splashed in red," he added.

The Indian car industry has been on a cruise with sales growing at high double-digit rates for two years, before slowing down and eventually falling in the current fiscal year. In October, car sales suffered the worst year-onyear fall in a decade, slumping 24% to 1.38 lakh units.

There has been increased competition in the market with global carmakers rushing to the world's second fastest-growing car market, rolling out tens of new and made-for-India models at extremely competitive prices. This forced existing players to cut prices to defend their market share. While this ensured a wide choice to consumers, increase in food and fuel costs and rising rates of interests eventually forced many potential buyers to put off their purchasing plans.

Source : economictimes.indiatimes.com