Steel trap: cars set to get costlier

2008 has already become an unremarkable year; it’s going from bad to worse. Just when the commodity prices had begun to relieve, the re-imposition of 5 per cent duty on steel import is likely to impact car prices again. This will be the second time in this economic that car prices would see an upward revision. “The market is tough and input costs are still high. We are looking into the possibility of another price increase,” said a Hyundai Motor India Ltd spokesperson.

Though steel prices at large have come down by 40 per cent in the last three months, prices of specialized steels like the ones used in automobiles have stayed firm. With over 80 per cent of auto industry’s steel requirements met through imports, the five per cent duty will have a direct impact. A corresponding 16 per cent depreciation of the rupee vs dollar is another add-on.  Dilip Chenoy, director general, Society of Indian Automobile Manufacturers said “Suppliers are asking for a 5-7 per cent increase and though negotiations are on, there may be no option for carmakers but to increase prices in the short term. Along with the rupee depreciation, the impact is over 20 per cent.”

Even domestic suppliers like Tata Steel and Bhushan Steel are asking for a price increase. Nitin Johri, CFO, Bhushan Steel said “Nobody can absorb the 5 per cent duty and that has to be passed on to the automotive industry. Steel prices have hit the bottom and we expect it to firm up again from January. Auto grade steel prices have not dropped much because it is a high value added specialized product with few suppliers.”  Market leader Maruti Suzuki India Ltd has already affected a Rs 2,000-6,000 increase in prices as its primary steel supplier Japan’s Nippon Steel sought a 22 per cent increase in prices. Honda Siel Cars India has announced a Rs 10,000-1,50,000 hike in prices from January as it is impacted by currency fluctuation.

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