Maruti Suzuki India Limited (MSIL), the country's favourite auto maker, seems to have succumbed to the intense pressure due to prevalent economic slowdown in domestic auto market and has revealed intentions to hike the prices of its existing vehicles before October 2012.
MSIL is the leading passenger car manufacturer in the country and has been the most popular automobile brand in the country for more than two decades. Hence, the decision of increase in prices of its products, just before the Indian festival season seems abnormal and reeks of helpless desperation at end of Maruti Suzuki. The company revealed that it is currently negotiating a hike in prices of its vehicles and Indian buyers may have to wait till next week for the formal announcement.
According to industry experts, the slackening automobile sales in the country along with the devaluation of INR against the Japanese Yen are among the prime reasons behind the decision of Indo-Japanese alliance to hike the prices of its products on Indian turf. The decline in the value of Indian rupee has resulted in high import duties, thereby increasing the overall cost value of all imported auto makers like Suzuki, Honda and Toyota among others.
Interestingly, MSIL is not the sole auto company to have been bitten with the price hiking bug. The other Japanese player, Honda Cars India (HCI) has also increased the prices of its products including Brio and Jazz hatchbacks and the company's top selling City saloon, by 0.2-2.6 per cent more than the current prices. Accordingly, fellow Japanese automotive bigshot operating in the country, Toyota announced in August 2012 to hike the prices of its various models by 1.5 per cent, which is slated to come into effect from September 1, 2012.
Justifying the company's attention grabbing decision, Mayank Pareek, Chief Operating Officer (COO), Marketing and Sales, Maruti Suzuki India Limited, said, “There is pressure on our margins due to the foreign exchange fluctuation. We’ve to take a call on the prices.”
Currently, MSIL's domestic market portfolio comprises small cars-800, Alto, A Star, Ritz, Swift, sedans – Swift DZire, SX4, Kizashi, along with Utility Vehicles (UV) like Ertiga and Grand Vitara, which are available within a price bracket of Rs. 2.04 lacs and Rs. 17.5 lacs (ex-showroom New Delhi). The upcoming price hike will greatly impact the buying capacity of Indian buyers and the high auto finance rates will pile on problems for them as well. Further, top company officials believe that the company has devised the price hike decision to cut back its forex exposure to Rs. 3240 crore ($ 600 million) by March 2015, a sharp drop of almost 65 per cent. MSIL has also advised its vendors to reduce their total imports, in order to achieve the projected target by 2015.
MSIL is also busy with the build up towards the launch of the most awaited car of the year, the Alto 800 around the second week of October. The Indian audience will definitely find it hard to digest the speculated price hike and the company seems to be embarking with a hell of a risk, just before the Indian festive season when it records its peak sales for the year.
