New Delhi: As margins and profits grow thinner for the Indian auto industry on account of higher raw material prices, especially that of steel, some companies are ready to effect yet another round of price increases.
Rohtash Mal, CEO and ED, Escort Tractors says that tractor prices have already been raised thrice this year and there may be yet another increase. “We have raised prices three times in the previous months. We will probably raise prices again.” Mal points out that there are very direct linkages between the steel and the auto industries. For instance, 1800 kilos of steel are used to make just one tractor.
Two wheeler company Hero Honda too has raised the price of its motorcycles earlier this month but says that it has kept the option of raising prices open. The company’s vice president for marketing and sales, Anil Dua, says that the recent price rise has only partially offset the rise in the cost of inputs for the company.
According to industry sources, while primary steel manufacturers are holding the price of steel steady, secondary steel manufacturers that adapt steel to products for industry usage, are passing on the product increase to end users like auto and real estate companies. For instance, the cost of one of the most commonly used forms of steel, hot rolled coils (HRC) has risen from $850 per tonne levels in May to $1,000-1,050 per tonne levels in August.
The Indian auto sector accounts for 10-15% of total steel demand in India. According to auto industry players, steel can be between 60-70% of a vehicle’s total weight and can account for between 30-40 percent of its cost of manufacturing. As such, it is one of the main raw materials used for manufacturing.