As Steel Costs Continue To Soar, Automakers To Hike Prices Again Soon

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Due to rising input costs, automobile manufacturers in India are planning to hike prices in the first quarter of the next fiscal year

Near the beginning of this year, a lot of automobile manufacturers had hiked the prices of their vehicles to offset the increasing input costs. However, as the prices of raw materials continue to rise, we might see another hike very soon. The markup will affect not only passenger car and two-wheeler segments, but the commercial vehicle market as well.

This is particularly concerning for truck manufacturers, as sales were starting to hit green after nearly two years of poor demand. The switch from BS4 to BS6 compliance had already been an expensive affair, and there have already been a few price revisions since. Further elevation of raw material costs could potentially stunt the growth of the commercial vehicle market.

As for passenger cars, companies like Maruti Suzuki, Hyundai, Mahindra & Mahindra, Tata Motors, etc, had implemented major price hikes last month. Same is the story with two-wheeler manufacturers in India, like Bajaj (along with KTM and Husqvarna), TVS, Hero, Honda, Royal Enfield, etc. Almost every manufacturer is considering another price hike around the start of the next fiscal (FY22).

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Domestic steel manufacturers have increased prices a few times since mid-2020 for different types of steel. Vikas Bajaj, President of Association of Indian Forging Industry, has stated that the price of hot rolled coil steel has increased by 43 per cent since July last year. Steel mills and OEMs are currently in discussions regarding the prices, and more importantly, the supply.

Other than steel, semiconductors are also in short demand right now, not just in India, but globally. The lack of semiconductor chips has heavily disrupted automobile production, with manufacturers having to shut down production lines temporarily, and prioritise the production of certain vehicles over others.

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Although the Indian market has shown strong signs of recovery post lockdown, the steadily rising costs pose a major challenge for the automakers. Also, the Indian automobile industry is currently in the midst of electrification. Existing manufacturers as well as new ones are working towards offering “affordable” electric mobility solutions. Rising input costs are sure to throw a wrench in those plans.