Maruti, Toyota, GM, Honda To Hike Car Prices

Published: Wednesday, November 23, 2011, 15:20 [IST]

The drop in value of the Indian Rupee is having a huge impact on the auto industry. Imports are getting more expensive and carmakers dependent on imported parts are facing the brunt of the damage. Carmakers who are already suffering a slowdown in sales are at a catch 22 situation. As the increased import costs is reducing profitability and increasing prices has become inevitable. But increasing prices will further reduce sales that are already low.

Several carmakers are now planning to increase prices in response to the depreciating rupee. Major carmakers like Maruti Suzuki, Toyota, Honda, General Motors and Audi have said import costs have gone up dramatically. Toyota is planning to revise its prices in January and the hike could be anywhere between 1% to 1.5%. General Motors is also expected to increase prices in the same lines.

Maruti Suzuki, India's leading carmaker is also under severe pressure to re-allign its pricing strategy. It has already increased prices of its diesel cars due to the appreciating Yen. Now the depreciating Rupee will put pressure on Maruti's entire line-up of cars. Speaking about the current situation, Maruti Suzuki CFO Ajay Seth said: “ The rupee depreciation is adversely impacting us and this is the worst movement of the currency against the US dollar . It has lost 15% in the last two months."

GM is under even more pressure to increases prices as it not only imports parts but also entire engines for the cars such as the Spark, Aveo, Optra and U-VA. Premium carmaker Audi has also said the rupee's depreciation against the Dollar and Euro will necessitate an increase in prices.

The appreciating rupee will only help carmakers who have higher exports. Hyundai and Nissan could be the beneficiaries. Other carmakers who have small exports cannot offset the losses suffered from imports with their exports.

Article Published On: Wednesday, November 23, 2011, 15:17 [IST]

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