It is time for car makers in India to book profits and patch up their losses made in 2008 or early 2009. The rising market and better purchasing parity has come in just at the time when new stricter emission norms are coming into force. Moreover, inputs costs have been soaring since a long time and auto manufacturers have been having a hard time trying to keep the costs down and cutting down their margins.
Car prices in India are slated for a two-phase hike in India. Every automobile manufacturer has to switch their models to newer technology to keep up with the new emission norms coming into effect from April 2010. Prices of Honda Civic, Mahindra Scorpio and Maruti Swift will get expensive at least by Rs. 10,000- 20,000.
Maruti Suzuki is in the process of negotiating its contracts with its suppliers as the material costs have gone expensive at least by 5-7 percent. The price will eventually affect the end product in the market even though the company tries to absorb the rising costs. “We are currently negotiating prices and final negotiations are yet to be concluded,” said S Maitra, Maruti’s managing executive officer (supply chain).
The current rising markets have given some encouragement to car makers to pass on the price hike to the customers. “Steel and other major metal suppliers are pressing for price increase from for some time. We’ll try to absorb it but some may have to be passed on to the customers,” said Pawan Goenka, head of the automotive division at Mahindra & Mahindra.
According to new emission norms, new cars sold in 11 major cities will be as per the BS IV rules while in the rest of the country they will be according to the BS III norms. Switching to new technology asks for an investment of Rs. 5000 – 15000 in new vehicles including buses and trucks.
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