Auto News

Auto companies hit by falling rupee, mull price hike

By Motortrend India Staff   |   22 November,2011

Hit by the depreciating rupee, auto companies, including General Motors India and Toyota Kirloskar Motor, are mulling hike in prices to offset the rising cost of component imports.

“We import lots of parts and the rupee depreciation is impacting us. We were planning to review prices in January but due to the currency fluctuation we may have to do it soon,” General Motors India Vice-President P Balendran told media. He said commodity prices have also been increasing, adding to the burden on auto firms. “We are currently evaluating the quantum of impact on the prices of our products,” he said.

Expressing similar views, Toyota Kirloskar Motor Deputy Managing Director (Marketing) Sandeep Singh said the present currency fluctuation is affecting the company severely. “It is a double whammy for us. On one hand, yen is appreciating, while on the other hand rupee is depreciating. Our margins are getting impacted,” he added.

Asked if the company will increase the prices, Singh said: “As of now we are absorbing, but if there is too much pressure, then we will share the burden with customers. Currently, we are revisiting the prices of all our models. Any new price increase, if we take, will be applicable from January 1.”

The rupee plunged to an all-time low this morning to Rs 52.75 against the US dollar on the Interbank Foreign Exchange on sustained demand for the American currency. It is putting severe pressure on companies which import substantial amount of components from overseas.

“The rupee depreciation is adversely impacting us as we are a net importer. This is the worst movement of rupee against US dollar. It has lost 15 per cent in the last two months,” Maruti Suzuki India (MSI) Chief Financial Officer Ajay Seth said.

MSI has both direct and indirect exposure to foreign currencies while importing components, and it imports about Rs 8,000 crore worth of parts annually, he added. “At the same time, we also export cars and that is benefiting at present. However, considering both, we are impacted as a net importer. The situation is affecting our margins,” Seth said. He, however, said the company does not have any plans at present to increase the prices of its products.

The hit due to the weakening of rupee comes at a time when auto makers have been enduring one of the toughest periods with car sales in the country on a continuous decline.

In October, car sales in India registered their steepest monthly decline in nearly 11 years, tanking 23.77 per cent on account of a huge drop in output by the country’s largest car-maker MSI due to labour trouble, coupled with high interest rates and rising fuel prices.

Another auto maker Honda Siel Cars India (HSCI) said it is not impacted so far as it is protected under long term contracts with its foreign vendors.

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