Government Ask Auto companies to Reduce Prices

author image Rishi
Tuesday 31 March 2009, 00:00 AM

The government has indicated to the auto companies to roll back their price hikes done in past few months. According to unconfirmed sources, the government has warned the auto makers that it will not consider any stimulus packages unless they reduce the prices of popular brands.

The government is not pleased about the price hikes done by some of the major automakers in India like Maruti Suzuki India, Hyundai Motors India Limited, Toyota Kirloskar Motors, and General Motors. Models such as Optra, Swift, A-Star, Spark, Corolla have witnessed a price hike anywhere between Rs. 3,000 to Rs. 50,000.

On the other hand the car makers have an argument that when there was no demand in the market, they had absorbed the higher input costs. However, since the demand has picked up in last two months, they have passed on some of the cost increase to the consumers. According to a Maruti Suzuki official, the company’s profits have slipped by atleast 32 percent in the first nine months. There has been an increase in the commodity prices and therefore the company had to increase the prices of its popular models.

The government refutes the argument “The contention of high input prices is not valid as it would have impacted all vehicles, and not just the bestsellers. Increasing prices just a month after duty cuts is not justified,’’ a finance ministry official said on condition of anonymity. He further added that the input costs for commercial vehicles, two-wheelers etc. have also increased and they have not increased their prices so far.

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