Rising Import Costs might force Maruti Suzuki to increase prices

The till-date dominant carmaker of India, Maruti Suzuki, might just have to scale up the prices of its vehicles early in 2012, officials said this Thursday. The weakened Rupee has caused an escalation in the costs of imports, whereas there has been no change in the market demand in recent times, forcing the company to take this decision of price-hike.

The Indian market has seen a reduction in car sales following high increase in the interest rates, continuous rising fuel prices as well as a slowdown of the economy. This was a vastly different picture from the previous year when the auto sales rose by 30% making India the second-fastest growing auto market.

Maruti sales had slumped by 18.5% in November, compared to 2010’s same period figures, following labor strike at their Manesar plant. However, they had recorded better sales than October.

The Head, Marketing & Sales, Mayank Pareek, in an interaction with media said that the company had identified some stress points in the recent future, though they would continue to perform with competence in the Indian auto market over medium to longer terms.

Rising Import Costs might force Maruti Suzuki to increase prices

Pareek also said that the joint-venture company, in which Suzuki of Japan held 54.2% stake, could raise the prices of their vehicles post December as the sharp decline of the Rupee in International trading had drastically affected their import costs.

Prices of the diesel variants of Maruti had already been raised in November. The Chairman of the Company, R.C. Bhargava said that the company faced double jeopardy because as the Rupee was decreasing, the Yen was getting stronger. This increased costs further for the Yen-dominated imports. In fact, the Yen, in just the previous year, has appreciated 28% against the Indian currency.

The Rupee experienced its worst fall in 16 years this November, falling 6.7% against the Dollar.

Bhargava expected the Manesar plant that had been recently hit by labour strikes, to be fully operational by January, producing 800 vehicles daily. It is to be noted that the recent strike had cost Maruti to lose out on 83,000 cars, cumulating to $500 million in output.

The RBI, having raised the rates of interest 13 times since 2010 for controlling inflation, has directly affected growth across all sectors.

With the slowdown of the Indian economy to its weakest growth in the last 2 years, along with Maruti Suzuki output being the slowest in the previous 3 years, the company had to face a lot of losses.

Sales figures of the Company are expected to experience a decline in the current financial year ending March, said Bhargava recently.

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