Durables, auto firms not to pass on price cut

Consumer durables and auto companies are refusing to pass on the benefit of the cut in steel and aluminium prices. Both metals account for 60 per cent of total input volume in consumer appliances and automobiles.

A modest and temporary dip in metal prices need not be reciprocated by a cut in the price of the end product, auto majors and consumer durable companies told Business Standard.

While Steel Authority of India, Essar, Jindal Vijaynagar and Ispat had announced a Rs 2,000 per tonne price cut, Nalco and Hindalco had pared aluminium prices by Rs 2,500 yesterday.

"Steel prices have been rising by more than 30 per cent for the last 18 months. The company has been absorbing this price hike without passing on the disadvantage to the customers. In the immediate future, there won't be a reduction in prices of consumer durables from our stable," said S Sethuraman, director, Videocon Appliances.

"The price reduction is not sharp enough to be passed on to the customers. Besides, the industry has always absorbed the past metal price hikes," said G Sunderraman, vice-president, sourcing, Godrej & Boyce.

The industry is worried about the rising prices of other components such as polymers.

"Prices of polymers and copper are continuously rising. This balances the cut in steel and aluminium prices. We are closely monitoring the situation," said SM Rai, head, logistics & commercial at LG.

Auto manufacturers too feel that the steel price cut has not been sharp enough to impact the vehicle prices.

"Maruti sources components from dealers based on long-term contracts. A temporary and small reduction in steel and aluminium prices cannot be passed on to the consumers right now," said a source close to Maruti Udyog Ltd.

"Mahindra & Mahindra has adopted a wait and watch policy. The company's steering committee will meet to analyse the situation. A decision will be arrived at after this meeting," said an official spokesperson at Mahindra & Mahindra.

Tata Motors is not looking to bring down its auto prices immediately, said sources close to the company.

Incidentally, Tata Steel has not cut its steel prices yet.