Caught in the middle of a double whammy of the rupee slide and sharply increased petrol prices, carmakers fear that the industry may be facing another tough year.
Companies such as Maruti Suzuki and General Motors planning to increase model prices to offset the higher cost of imported components, may now have to re-visit their plans. This is because the already subdued demand is likely to take a further hit on higher petrol prices.
“Ideally we should increase prices, but now we will have to work on this. I don't think petrol prices have ever gone up as much in a single go. We should take a call tomorrow,” said Mr Mayank Pareek, Maruti Suzuki's Managing Executive Officer (Marketing & Sales).
A continued depreciation of the rupee has led to a sharp rise in the cost of imported components across the industry and for some, a rise in the cost of repayment for dollar- denominated borrowings.
Mr P. Balendran, Vice-President at GM India, said that the company will revise model prices very soon.
“The gap between diesel and petrol has now widened to more than Rs 34. The industry will have a very tough time, I will not be surprised if it ends in the negative territory this year,” he said.
Industry experts say that the huge petrol engine capacities of the top carmakers such as Maruti Suzuki will suffer, while the already high diesel car demand will see a further boost. A rapid increase in discount and other offers on petrol vehicles are expected to clear inventories.
“Demand is already under pressure on account of inflation and high interest rates. A hike of such magnitude is neither good for the customer nor for the industry,” said Mr Arvind Saxena, Director for Marketing and Sales at Hyundai Motor India.
However, the third largest domestic carmaker Tata Motors expects “no significant impact”. This is because localisation is very high on its car models, while its sales mostly constitute of diesel vehicles.