For car makers, the last resort to survive the chill wind of the faltering value of rupee cannot be considered as a guaranteed reliever, but probably a dart thrown in the dark that may turn into a boomerang. Recently, they have mulled upon inflating the prices by up to Rs. 10,000 and Rs. 25,000 for small cars and sedans respectively, notwithstanding the lifeless sales patterns in the market.
Maruti Suzuki, Toyota, General Motors, Honda and Skoda Auto are planning to bring about a noticeable hike in their prices quite soon, instigated by escalating costs of imported components, company executives said.
As a matter of fact, the rupee has lost about 17% weight against the U.S. dollar since January, stooping down a record low of Rs. 52.73 last week that has left the car makers high and dry. It must be noted that manufacturers who import between 10% and 40% of components for various models are expected to undertake the step.
"We will have to pass on the cost to customers to offset the rising impact of depreciating rupee and the rising cost of making diesel cars that are currently selling like hot cakes," a senior Maruti Suzuki executive confirmed, without being named. Maruti Suzuki, which imports components to the tune of Rs. 8,000 crore every year, is suffering a 15% loss in the margins due to incompetent rupee, he added.
Luxury car makers such as Audi, which bring in fully-built models to serve the local market, are also joining the league to increase prices by up to Rs. 50,000. Analysts said, let sleeping dogs lie because teasing the prices could invite a possible catastrophe in the depressing market.
"If competition is coupled with rising input costs, sky-rocketing fuel prices, hike in interest rates and an eventual increase in the prices of vehicles, the consequence is disastrous. The demand is stymied and manufacturers become mute spectators as they see their unsold stocks pile up at dealerships," Motown India Editor P. Tharyan said.
The car makers operating in the Indian industry have come out with flying colours as the sales growth touched double digits for two years, before being exposed to reversal of winds and subsequently loosing its shine. In October, car sales witnessed the most horrendous year-on-year fall in last 10 years, slipping down 24% to 1.38 lac units.
"This condition, if it persists, has a nasty effect on the bottom line of companies and can, in extreme cases, lead to a balance sheet splashed in red," Tharyan added.
Auto makers from around the world have been making their way to the world's second fastest-growing car market, conjuring interminable new and India-oriented models with highly competitive price tags.
Eventually, the existing brands were seen making significant revisions in their car prices, which offered a wide range, to chose from, to consumers. However, the increase in food and fuel costs, along with rising rates of interests weakened consumer sentiments and kept sales rise at bay.
Thus, adding weight to the price tags does not seem to be the best option, but definitely and unfortunately the only option left with the car makers to avert submergence.
