Spiralling prices of key input costs like steel, aluminium and tyres have forced Maruti Suzuki India to hike prices on some of its key models. But Maruti has kept the price hikes quite low, at about 1-2% per car, to ensure that there is no impact on demand. But car companies often give discounts, including finance and exchange discounts. So, Maruti has the option of trimming discounts too, to offset cost hikes.
The company has said that it is holding back price hikes on some key models, in light of the market situation. The car market has become very competitive, especially in the small and popular mid-sized car segments, which will tie Maruti’s hands when it comes to price hikes. The company cannot afford to lose market share to its relatively newer rivals in the car market. To keep costs under control, Maruti will also put pressure on its suppliers. The average increase is about 0.6% according to the company, ranging from 0.12% on the Ritz VDi to 1.9% on the Dzire LXi.
Though there may be some impact on its margins due to higher costs, Maruti’s core concern will be to keep volume sales up. Higher output could even allow it to negotiate better terms with suppliers. A key event to look out for automobile companies is the phased withdrawal of the fiscal stimulus, which benefited the automobile industry to a great extent.