Another Car/Bike Price hike in the offing? Not improbable, we say

Indian Currency

Commodity prices are shooting through the roof. Picture this, steel is trading 25% more than it did at the same time last year, Aluminum is selling about 150% more than it’s one year old price and the tire makers have succumbed to increasing rubber costs and gone in for the hike.

Now, the questions in from of the Indian auto makers remain, when to hike or whether to hike at all. The second question is the one that’s currently being debated in corporate boardrooms across the Indian auto world as it was as recent as April, 2010 when car makers pulled the price hike trigger of about 3% citing rising input costs and the Bharat Stage 4 effect.

Another price hike coming so close to the previous one could simply derail the sales growth, which has been explosive so far. On the other hand, most of the auto companies are publicly listed and are under tremendous pressure to outperform previous growth and profit forecasts.

This makes it imperative for them to either reduce costs by fine tuning their production processes or hike the prices and make the books look better. For now, the auto makers seem to be taking the first option in the fervent hope that the commodity prices do show some signs of southward movement in the coming months.

That said, there is a limit to on how well they can fine tune their production processes and if in the worst case, commodity prices show no signs of weakening, manufacturers will have no option but to pass on the increased costs to customers. The consumers like you and me will have to grin and bear it just like the other inflationary pressures we are being besieged by currently.

Image courtesy: Brookmeier

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