Auto Companies Hit By Falling Rupee: GM And Toyota Mull Price Hike

The auto companies have been badly affected by the depreciation of the Rupee. The impact is so high that auto giants like Toyota and General Motors are considering a price hike to offset the rising import costs on components.

In a media interaction, P. Balendran, Vice President, General Motors India said that they had been affected badly by the depreciation of the rupee as they had to number of parts. The company had been planning reviewing their prices in January but the same could be brought forward due to the current crisis.

Prices of commodities also increasing have further burdened the auto firms and the quantum of its impact on the product pricing was also being evaluated.

Auto Companies Hit By Falling Rupee; GM And Toyota Mull Price Hike

Towing similar lines, Sandeep Singh, DGM (Marketing), Toyota Kirloskar Motor said that their company had been seriously affected by the present fluctuation of the currency. It was double jeopardy for the Indian operations of the company as the Yen was growing while the Rupee was depreciating. This was greatly affecting their margins.

On asked whether price increase was something about to happen, he said that the company was soaking in the pressure as of now, however longer sustaining pressure would entail sharing the load with customers. Prices were being re-evaluated for all their models and price increase, if any, would be effective from the 1st of January.

The Rupee, on Monday, reach its lowest ever point against the Dollar at Rs.52.50 due to growing demand for the Dollar. This has created enormous pressure on those companies that import a significant amount of parts from outside the country.

Maruti Suzuki India CFO Ajay Seth echoed similar sentiments stating that their dependency on import had caused losses in the previous two months of 15% because of the Rupee being at its lowest ever vis-à-vis the Dollar.

Though MSI has dual exposure to foreign currency due to exporting their vehicles along with importing parts, they still have been affected as they are net importers. Though their margins are getting affected, Seth denied any immediate plans of raising prices.

This impact has been even more hurting because the auto industry is suffering its worst decline phase in terms of car sales in Indian market.

Auto companies depreciationCar sales were at its lowest in the past 11 years in the month of October, a major reason being the labour strike at MSI, the largest manufacturers of cars in the country. This coupled with increase in fuel prices and higher rates of interest has brought in the present critical situation.

However, Honda Siel Cars India has not yet been affected by the present scenario as they are safeguarded due to long-term contractual agreements that they signed with their overseas vendors.  This was disclosed by Jnaneshwar Sen, Senior VP (Sales & Marketing), HSCI. He added that it remained to be seen as to what the impact would be like, if the current crisis continued for a long duration. He declined to comment on the specifics of the contracts the company had entered into.

Volkswagen Group Sales Indian Operations Director and Member of Board, Neeraj Garg said that they too had fallen under pressure due to the fluctuation of currency as they also imported sizeable contents for all their models excepting the Vento and Polo.

Vishnu Mathur, Director General SIAM deemed the current situation as complex as importers were paying higher costs whereas exporters were getting more revenue. He said that companies that did not have an export base would be impacted the most owing to the critical cost increase on their imported critical components.  Mathur however was apprehensive on costs of vehicles being raised as he felt that the current situation in the market was not feasible enough to pass on the additional burden to customers.

India’s second largest auto makers Hyundai said that though the costs of imports had gone ups, the company did not feel the effects due to their huge export levels. This was disclosed in a statement made by the spokesperson of the company.

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