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Hyundai to follow Maruti price trail

Parvathy Ullatil in Mumbai | March 23, 2004 09:14 IST

The passenger car market is geared up for yet another round of price hike with Hyundai and Maruti taking the lead this time. While Maruti has announced a price hike of around 2-3 per cent, Hyundai is expected to follow suit next month.

Maruti is planning a Rs 2,000-4,000 hike on all models, including the mainstay Maruti 800, while Hyundai is considering a steeper raise of around Rs 8,000-10,000 on its flagship Santro Xing.

This will be the second round of price hikes in auto mart this year with Tata Motors, Maruti and Hyundai having tinkered around with the prices in January-February.

But the last time around, the price hikes were less severe, "The beginning of the year is boomtime in the car market so most manufacturers kept a leash on prices. Since Tata Motors, Maruti and Hyundai work on long term contracts with their vendors their contracts will come for renewal in April and they will negotiate for a price hike," an industry observer said.

Mahindra & Mahindra set the ball rolling earlier this month when they decided to implement a one per cent increase in prices. Tata Motors is also expected to follow suit and push up prices in May but officials at Tata Motors' declined to comment on the same.

Steel prices have gone up nearly 100 per cent between July 2003 and February 2004, while car prices, which fell Rs 5,000-15,000 in April 2003 after the excise duty cuts, have stayed unchanged till January 2004.

It is not just steel, prices of other inputs such as metallurgical coke, scrap and rubber (tyres) have also been on an upswing in the same period.

Industry analysts predict an impact on carmakers' fourth quarter margins. "With car sales growing as much as 29 per cent this year, car makers have been abstaining from a price increase so far, absorbing the losses themselves. Their quarter-on-quarter margins on the fourth quarter will definitely record the impact of the rising prices of inputs," said an analyst with a leading brokerage.

A senior official at a top car company told Business Standard that small car makers can expect a 25 per cent dip in profitability this year on their cheapest offerings.

Maruti has said that their cost of production per car has gone up Rs 6000 in the last one year, while Hyundai has recorded Rs 6000-8000 hit per car.

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