Depreciation in rupee force auto makers to increase prices

author image CarTrade Editorial Team
Thursday 04 July 2013, 11:50 AM

Owing to a sudden fall in rupee, despite poor market scenario and dwindling sales, motor companies have started increasing prices to protect their margin window. Both Mahindra & Mahindra and General motors have come up with revised values of their latest models. Where utility maker Mahindra is hiking prices of all its models by up to Rs. 6000, General motors did the same thing to only their latest release, that is, Enjoy Multi Utility Vehicle by Rs. 10000.

Others key players like Maruti Suzuki, Hyundai Motors, Toyota Kirloskar Motors, Audi India and Mercedes-Benz have come up with similar plans, but state that they will go for execution once the market position normalises.

“The impact coming from the weaker rupee had made imports for our vendors costly, which forced us to hike prices even as our sales declined by 13% last month,” explained Mahindra's Automotive Division Chief Executive, Pravin Shah. Leaving the XUV500 and the SsangYong Rexton as exceptions, the auto maker has announced the price hike in its entire portfolio.

With all critical spares and machinery for manufacture of automotives being imported from overseas incurring a huge logistics and carriage charges, the bad rupee scenario which even broked the Rs. 60 per dollar mark this July 3, is driving the auto makers crazy, making them to look for ways to pacify the effect. Owing to this, coming up with this sudden price hike to payback the overseas suppliers without effecting their margins. “We have decided to increase the prices of all Enjoy models by Rs. 10,000 with effect from July 1,” stated the P Balendran, the General Motors India (corporate affairs) Vice President. Bearing a 10 per cent fall in sales last month the auto maker raised prices of its hatchbacks and sedans in June to overcome the component carriage money.

This wavering rupee value is also giving sleepless nights to some European car makers that not only just import components and engines for the Indian market, but, also bring in expensive sedans and coupes from abroad. Michael Perschke, India Head of luxury car maker Audi, said, “We will soon increase prices by up to 3% to protect margins in view of the steep fall in the rupee. Prices would be increased between July and August.”

Other car makers, however, have delayed any price hike to seize a sales drop in future. Sandeep Singh, Toyota's Deputy Managing Director and COO, said that in view of the rupee and muted market sentiments, the company will take a call on price increase next month. He added, “We are not increasing the prices as of now and will keep on reviewing the situation.”

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