Automobile companies are battling with the soaring prices of raw materials. As a result, they are searching for alternative methods in order to keep their margins intact.
Even the largest vehicle makers in the country such as Maruti and Hero Honda, who are the pioneers of car and bike segment, are not unaffected by the soaring input cost. The last quarter saw a drop of 20% in net profit of both the companies, reason being the price hikes.
Mr. S Maitra, managing executive officer (supply chain), at Maruti Suzuki said in a statement, “The pressure is very serious. All commodities are going up, including steel, copper, rubber and plastic products.” Maruti is now planning to curtail the wastage from their manufacturing plants. “The idea is to make ourselves lean, so that wastages come down,” Maitra said.
On the other hand, Hero Honda is also tackling with similar pressure of rising prices. According to Mr. Ravi Sud, CFO, the issue was acute, prompting the company to even consider the option of another price hike. He added that “Steel, rubber, all are going high. Steel prices are up by 20-25% since January and the issue is serious as it is leading to compression of margins.”
