India’s largest carmaker Maruti Suzuki is reportedly keeping a close watch on rising global commodity prices and the pass-through effect they will have on local vehicle prices and ultimately sales.
Press Trust of India reports that material costs usually comprise 70-75% of an auto’s total cost in India, but during the second quarter the percentage had hit an unprecedented 80.5%.
The carmaker has raised prices three times this year, but senior executive director for marketing and sales Shashank Srivastava claims Maruti Suzuki has not “passed on even the past increases of commodity prices into our (vehicle) price hikes.”
Maruti Suzuki reported a 24% decline in sales at 138,335 units in October, compared to 182,448 units in October last year. The domestic sales slipped 32% to 117,013 units last month against 1,72,862 units in September 2020.
Industry-wide car sales were down 21% year on year in October, according to industry estimates.
Srivastava said relevant commodity price spikes peaked in the first quarter, but for original equipment manufacturers, the inflationary effect lags by one quarter. He clarified that since May 2020, almost all commodities required for automobile production have witnessed a manifold increase in prices.
Steel has gone up to 72 rupees a kilogram from 38 rupees, while copper is now at US$10,400 a tonne, up from $5,200. The prices of other precious metals like palladium, platinum, and rhodium have doubled and trebled, he said.
Aluminum is also in short supply in India and the imports have become prohibitively more expensive. Global aluminum prices have more than doubled since April 2020 to over $3,000 a tonne in October.
Domestic aluminum prices have also gone up around 75% since April 2020. Aluminum is extensively used in passenger vehicles to make them lighter and improve fuel efficiency.
Tata Motors president Shailesh Chandra has also expressed concern over high commodity prices and did not rule out the possibility of another price hike for its autos, India Today reports.
He said the rising cost of steel coupled with semiconductor shortages will lead to price rises as well as longer waiting periods for the delivery of cars. Tata’s sales outperformed the market in October, up 43% year on year, driven by robust electric vehicle sales.