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Steel trap: cars set to get costlier

autos Updated: Nov 25, 2008 20:51 IST
Sumant Banerji
Sumant Banerji
Hindustan Times
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It is already a forgettable year for carmakers and with every passing week, it’s going from bad to worse. Just when the commodity prices had begun to ease, the re-imposition of 5 per cent duty on steel import is likely to impact car prices again. This will be the second time in this fiscal that car prices would see an upward revision. “The market is tough and input costs are still high,” said a Hyundai Motor India Ltd spokesperson. “We are looking into the possibility of another price increase.”

Though steel prices at large have come down by 40 per cent in the last three months, prices of specialised steel like the ones used in automobiles have stayed firm. With over 80 per cent of auto industry’s steel requirements met through imports, the five per cent duty will have a direct impact. A corresponding 16 per cent depreciation of the rupee vis a vis dollar is another add on.

“Suppliers are asking for a 5-7 per cent increase and though negotiations are on, there may be no option for carmakers but to increase prices in the short term,” said Dilip Chenoy, director general, Society of Indian Automobile Manufacturers.
“Along with the rupee depreciation, the impact is over 20 per cent.”

Even domestic suppliers like Tata Steel and Bhushan Steel are asking for a price increase. “Nobody can absorb the 5 per cent duty and that has to be passed on to the automotive industry,” said Nitin Johri, CFO, Bhushan Steel. “Steel prices have hit the bottom and we expect it to firm up again from January. Auto grade steel prices have not dropped much because it is a high value added specialised product with few suppliers.”

Market leader Maruti Suzuki India Ltd has already affected a Rs 2,000-6,000 increase in prices as its primary steel supplier Japan’s Nippon Steel sought a 22 per cent increase in prices. Honda Siel Cars India has announced a Rs 10,000-1,50,000 hike in prices from January as it is impacted by currency fluctuation.