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Monday, September 27, 2021

‘High input costs’ weigh: Maruti to raise prices for third time in 2021

In its communication to the stock exchanges, the company said, “We wish to inform you that over the past year the cost of company’s vehicles continue to be adversely impacted due to increase in various input costs.

Written by Sandeep Singh | New Delhi |
Updated: August 31, 2021 3:01:52 am
Corporate office of Maruti Suzuki India Limited is pictured in New Delhi, India, February 26, 2016. (Image: REUTERS)

In a move that may dampen consumer sentiment ahead of the festive season, Maruti Suzuki India Ltd announced that it will increase the price of its vehicles in September, following the sharp rise in input cost over the last 15 months. This will be the third price hike announcement by the market leader this calendar year.

While the company had announced a hike of 1.4 per cent in January, in April it raised the price of its vehicles by another 1.6 per cent. While the company did not disclose the quantum of increase in September, sources say it could be 3-4 per cent.

In its communication to the stock exchanges, the company said, “We wish to inform you that over the past year the cost of company’s vehicles continue to be adversely impacted due to increase in various input costs. Hence, it has become imperative to pass on some impact of the additional cost to the customers through a price rise. The price rise has been planned across models in September 2021.” Following the stock exchange announcement, the shares of MSIL rose on Monday and closed at Rs 6,797, a gain of 2.9 per cent.

Speaking to The Indian Express, Shashank Srivastava, senior executive director, marketing and sales at MSIL, said while input cost pressure has been there for last 15 months, MSIL did not raise prices proportionately and tried to avoid passing the input cost on to the consumer as it hurts affordability and demand. “We tried improving our efficiency and manage it hoping that the prices would soften. But they have been hardening and we are left with no choice but to go for another hike. This time it would be a substantial hike,” he said. Commodity prices have been rising over the last one year and it has been putting pressure on vehicle manufacturers. Almost all automobile manufacturers have raised prices of their vehicles over the last six months on account of the rising input cost.

Srivastava said prices of steel and copper, which are key input metals, have nearly doubled over the last 15 months and even the price of precious metals, such as rhodium, has risen from around Rs 18,000 per gram to over Rs 64,000 per gram now. “While prices of precious metals have gone up, it is important to note the quantum of precious metal used in vehicles has gone up since BS-VI switch-over, thus it has been a double whammy,” he said.

At a time steep rise in fuel prices have hit the affordability of running a vehicle, Srivastava feels that the price hike of vehicles will also have an impact on consumer sentiment and revival of demand. “There has been some revival over the last couple of months but it is still far from where we were in 2017-18 and 2018-19. While there are worries over the third wave and rising cases in Kerala and parts of Karnataka, monsoon in August has also raised some concerns. The price hike will also have its impact. On the positive side though, we have been encouraged by rural demand,” he said, adding the chip shortage has been another area of concern.

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