Car prices — and loans to buy them — are set to head north. The prices of aluminium, steel and copper have been rising steadily in the last two years, while the Reserve Bank of India (RBI) has cut money available for loans to rein in inflation.
February and March were good for car companies and buyers, as prices were slashed after Budget sops. But rising costs of materials are set to negate that. While car companies have been trying to absorb some of this rise, they may now pass it on to buyers, said Aniket Mhatre, analyst at brokerage firm Prabhudas Lilladher.
While no car company is categorical about how much they’ll raise prices, sources said they are thinking about a two to three per cent hike. This means, a Rs 3 lakh car could cost Rs 6,000 to Rs 9,000 more.
Maruti Suzuki sources said the company plans to announce a hike soon, as is Honda. However, Honda officials said it was too early to comment. A Tata Motors spokesperson refused to say whether they would raise prices.
The price of cold rolled steel, used in car bodies, has risen by Rs 12,000 per tonne over the last year. Hot rolled steel, used in other parts, rose recently by Rs 5,000 a tonne.
Adding to the trouble, critical imported parts are becoming more costly with manufacturers abroad demanding higher prices to cover currency fluctuations. Honda, Toyota Kirloskar, Maruti Suzuki and Hyundai import several car components from Taiwan and Korea.
On Thursday, the RBI raised the cash reserve ratio — the proportion of deposits banks are supposed to keep with the central bank — to 8 per cent from 7.5 per cent. This means banks would have less cash for loans, thus making car loans more scarce and perhaps more expensive.