Maruti Suzuki has confirmed that prices will increase across its entire model line starting September 2021. According to the leader of the market, this is the third price increase in the past year. Other automakers may follow suit. It was announced in June that the company would increase prices in Q2 FY 2021-22 (July-September, 2021) but on July 12, the Swift hatchback and all-CNG models were available at a price hike of Rs 15,000 each. In the latest regulatory filing, the company mentions its June price hike, as well as the upcoming price hike across all models. Many car models will witness price increase, but others could be spared, such as Maruti Swift, and the brand’s CNG range that includes Maruti Alto, Maruti S-Presso, Maruti Ertiga, Maruti Eeco, Maruti Dzire Tour S, and Maruti Dzire Tour M.
What are the causes for this price increase?
MSIL has described rising commodity prices as a major reason for transferring some of the costs to customers. The company’s Q1 FY 2021-22 (April-June, 2021) margins (profit after tax) declined by 62 percent sequentially from Q4 FY 2020-21 (January-March, 2021). PAT (profit-after-tax) had declined as a result of rising commodity prices, the company said. Cost-cutting measures were being taken to counter the decline.
A report by the Society of Indian Automobile Manufacturers (SIAM) shows that raw material prices have seen a sharp increase in the last few months, with steel registering an 87 percent increase in June 2021 as compared to the previous year. In the same month of this year, steel prices too rose almost 88 percent.
Furthermore, price increase for precious metals have been noticed too, with Rhodium recording a notable 149 percent rise year-over-year, Palladium (+33 percent), and Platinum (+29 percent). The following elements are crucial for the after-treatment system in cars that must comply with BS6 emission standards in the country.
Problems faced by automakers:
The Indian automobile industry is facing significant challenges, aside from the rising cost of raw materials, due to the worldwide shortage of semiconductors. In order to mitigate the situation and meet consumer demand, OEMs and their suppliers have been buying chips from alternate vendors at inflated prices, while still attempting to maintain assembly line production.
MSIL and Tata Motors announced price increase for their passenger vehicles beginning August 3rd. A 0.8 percent price increase was implemented earlier this month across the company’s model range, which makes it the third rise this year. A price increase of up to Rs 26,000 was announced by the manufacturer in January.
According to RC Bhargava, Chairman of MSIL, “The Indian automotive industry had grown at a double-digit rate from 1993 to 2010; only in the last 10 years has it slowed down.”. There are several reasons, but perhaps the most important is the significant increase in the price of acquiring a car by an ordinary citizen over the past decade. Regulations and the rupee depreciation contributed largely to the increase in manufacturing costs as a lot of goods are still imported.