Wednesday, 15 November 2017

Car, bike buyers should brace up for price hikes in January


Prices of essential metals such as steel, copper and aluminium have headed north in

 the past few weeks forcing automotive companies to relook at a price hike at the

 beginning of 2018.

 Three of the top five automakers - Maruti Suzuki, Tata Motors and Mahindra & Mahindra –
have signaled that price revision could be on the cards if commodity costs do not ease
out before end of this quarter.
With pre-festive period sales bringing a bonanza and consumer sentiment expected to
pick up momentum in the last quarter of the financial year, car and two-wheeler
makers are confident about the market absorbing the price hike.
Ajay Seth, Chief Financial Officer, Maruti Suzuki India, said, "We believe that
commodities are likely to go up from these levels. We already have seen certain
trends in a few commodities like copper etc., where we have seen a rising trend. In
steel, which is the a major commodity, so far we have been able to maintain price for
the first half but we are likely to see some increase in even steel prices in the second

half."

 "So we will have to see how it is stabilized but if the trend is what it is at this point in
time then the impact could be bit steep and also we have to watch where the steel
prices get settled because that is almost half the commodity that we deal with. But
especially things like lead, copper, zinc everything has gone up from the previous
level. Just to give you an indication, the commodity prices from last year till now have
risen by almost 200 basis points", added Seth.



A price hike is a mixture of a variety of factors such as competitive scenario, discount
levels, inventory levels, commodity price trends and, most importantly, the ability of
the market to absorb the hike. For instance, on the back of a good monsoon rural
demand has picked up for the car market leader Maruti Suzuki to the tune of 22

 percent.


When asked if Maruti Suzuki will raise prices Seth added, "We will have to internally
review (it). Our first endeavor is always to look at our own internal efficiencies before

taking a call or any increase".
Tata Motors, the country’s fourth largest car maker, too has cautioned of a revisit to
its prices after the end of this quarter. So far the Mumbai-based company has raised
prices of only commercial vehicle to the tune of 1 percent in October.

 "We will have to see what the market trends are after the end of this quarter. It is true
that raw material prices have started to firm up. With the pick-up in rural demand,
Seventh Pay Commission and the general rise in buyer sentiment we are reasonably
confident that the market should be able to absorb price hikes," said a top Tata Motors

 official.
For Mahindra & Mahindra the company brought a price hike across tractors and
passenger vehicles once since start of this year. Though it has not committed itself to
another hike as yet company officials have said that a price rise may have to be
carried out in the last quarter.
Pawan Goenka, Managing Director, Mahindra & Mahindra said, "Commodity price
increase has been in the order of 2.5 percent for tractor and 1 percent on automotive.
We have more or less passed on completely for automotive since April. We will be
completing the price hike on tractors in a month or two. Price increase depend on the
dynamic situation. We keep looking at input cost increase and competitive scenario".
Meanwhile home-grown two-wheeler makers Bajaj Auto and TVS Motors, too, have
signaled that a price hike is inevitable in January.

 K Radhakrishnan, President and Chief Executive Officer, TVS Motors, "Some
firmness in commodity prices is there. We might take a price increase in this quarter
and the next quarter".



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