Auto firms relieved over steel price cuts

Auto companies, which were buckling under the pressure of mounting input prices, have heaved a sigh of relief over the steel price cuts. More than the price cuts, the auto sector has welcomed the regime of price stability ushered in by Tata Steel.

Plagued by the constant increase in prices of inputs such as steel for most of last year and the first six months of this year, auto companies were absorbing more or less the entire impact of the increased raw material cost.

"This price drop will, to a small extent, help us in negating the impact of the rising fuel prices and the hit that we have taken on account of the rise in steel prices over the past few months," said P P Kadle, executive director -finance and corporate affairs, Tata Motors.

Though the auto manufacturers are not expected to pass on the benefit of the price cut to the customer, it is expected to ease the pressure on their margins.

Being the large consumers of steel, the price cut will benefit the commercial vehicle and passenger car segment more than the two-wheeler segment. Most auto players were looking for a bigger relief from the steel industry.

"We have undergone two or three rounds of price increases in the last financial year but the net price hike passed on to the end-customer did not exceed 1 per cent-1.5 per cent for most players. On the other hand, prices of steel, which constitute nearly 20-25 per cent of the cost of inputs in a commercial vehicle, has more than doubled in the last one and half years," said an industry source.

Tata Steel accounts for most of the automotive grade steel supplies to the industry with companies such as Tata Motors, Maruti Udyog, Hyundai, Mahindra and Mahindra etc sourcing from it.