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Tuesday, September 21, 2021

Explained: Why Maruti Suzuki will hike prices for the third time this year

Maruti to raise vehicle price for third time this calendar; September hike could be up to 4 per cent

Written by Sandeep Singh , Edited by Explained Desk | New Delhi |
August 31, 2021 11:47:37 am
At the Maruti Suzuki plant in Manesar, on the outskirts of New Delhi. (Express Photo: Tashi Tobgyal, File)

Maruti Suzuki India Limited (MSIL) will increase the prices of its vehicles in September. This will be the third time the market leader hikes its prices this year, and it comes just ahead of the festive season. In 2021, almost all automobile manufacturers raised their prices in line with the sharp increase in commodity prices — metals and precious metals — that form key inputs in production.

How much will Maruti Suzuki raise its vehicle prices?

In January, the company had announced a hike of 1.4 per cent, and that was followed by another hike of 1.6 per in April. While MSIL has not disclosed the quantum of increase in September, sources say it could be around 3-4 per cent — the biggest hike so far.

Why will there be a substantial rise in September?

Shashank Srivastava, senior executive director, marketing and sales at MSIL, said the input cost pressure has been piling over the last 15 months. So far, MSIL has not increased its prices proportionately, hoping costs would soften. However, as commodity prices continue to remain high, “we are left with no choice but to go for another hike, and this time, it would be substantial hike,” said Srivastava.

While he did not specify the quantum of hike, sources said it could be anywhere between 3 and 4 per cent.

How has the rise in commodity prices been?

Since April 2020, there has been a significant jump in commodity prices, especially metal and precious metals that are used in production. Srivastava said that while steel prices have risen from around Rs 38,000 per tonne in May 2020 to over Rs 65,000 per tonne now, the price of copper has nearly doubled from $5,200 per tonne to $10,200 per tonne in the same period. The price of aluminium too has risen by around 80 per cent in the same period.

Even the price of Rhodium, a precious metal that is used in catalytic converters and helps meet the stringent emission norms, has jumped from Rs 18,000 per gram in May 2020 to over Rs 64,000 per gram now.

Insiders say that following the BS6 emission norms, the use of Rhodium has increased worldwide in vehicle manufacturing, and that in turn is leading to a rise in its price.

Will the price rise hurt demand?

Manufacturers do feel that the price rise would hurt the festive demand, but say they are left with no choice as they can’t defer the price hike any more. While consumer sentiment is already impacted by the rise in fuel prices, insiders say the hike will further hurt the affordability of owning a car.

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