Following automakers like Honda, Mahindra & Mahindra, Bajaj Auto, Maruti Suzuki, Kia Motors, MG Motor and Renaut, Tata Motors too has announced a decision to increase vehicle prices from next month.
However, unlike most others, Tata Motors will increase prices for commercial vehicles only, while leaving passenger vehicles alone for now.
Around half of the company’s sales come from passenger vehicles segment, while the other half comes from commercial vehicles, though the latter contributes a significantly higher portion of its revenue compared to the former.
“The steady rise in material and other input costs, impact of forex and transition to BS6 norms, have cumulatively escalated the cost of manufacturing vehicles.
“The company had thus far been absorbing the addition in costs but with their steady rise in line with market trend, it has become imperative to pass at least some portion of the cost increase to customers via appropriate price revisions,” it said.
“The price increase is expected across the portfolio of M&HCV, l&LCV, SCV & Buses. The actual change in price will depend on individual model, variant and fuel type,” it added, referring to various categories such as light, medium and heavy commercial vehicles.
The increases will come into effect on Jan 1.
Over the past two weeks, most automakers have come up with similar announcements, keeping in mind rising commodity prices. The biggest cost pressure has come on the back of rising steel prices.
Most of the components inside vehicles are made of steel, and an increase in steel prices has a direct impact on the cost of production.
Commodity prices have been increasing globally in the last few months, largely because of the US Federal Reserve’s decision to pump in trillions of dollars into the global economy to prevent the US asset prices from correcting.
This has encouraged speculation, and driven the prices of various classes of assets up to record highs.
Commodity prices have also increased due to production curbs imposed by COVID-19 restrictions.
The situation has been especially bad in India, where steel prices are estimated to have risen by about 40-45% this year, compared to a rise of around 25 globally.
Responding to the sharp increase, real estate players on Friday wrote to PM Narendra Modi urging him to take steps to bring steel prices under control.
Real estate developers’ association Credai alleged that there was cartelization in the steel industry, and urged the government to block steel exports.
“With a continuous and sudden upsurge due to cartelisation in the prices of steel, cement and other raw materials, real estate developers are experiencing an inevitable increase in construction cost and are faced with a situation that will create a delay in delivery, stalling of projects in some cases, thereby impacting the homebuyers at large,” it said in its letter last week.
It alleged that steel prices have increased from Rs 40,000 per ton at the beginning of the year to Rs 58,000.