Maruti Suzuki rules out price rise

Despite pressure on margins, the company wants to maintain its pricing edge by absorbing the rise in input costs

Maruti Suzuki India Ltd (MSIL) is not contemplating any price raise, despite a 20-30 per cent surge in raw material prices in recent months.

Despite pressure on margins, the country's largest car maker — which sells three out of every five compact cars in the domestic market —wants to maintain its pricing edge by absorbing the rise in input costs, as rivals prepare to expand sales operations and launch new models.

Shinzo Nakanishi, managing director and chief executive officer of MSIL, said, "Right now, I am not thinking of any price increase."

"We will absorb the raw material price hike as much as possible. Definitely, there is pressure on margin. The competition is tough but because of it, the market is moving. There is always pressure on market share and we will defend it."

Maruti's rivals like General Motors and Tata Motors, had earlier signalled that a rise in car prices was on cards. A senior official at General Motors recently said that the company would definitely look at an upward revision in prices in January.

Industry watchers say the prices of key raw materials like auto grade steel, rubber and copper have risen sharply over the last eight-nine months, compared to the same period last year. Auto component suppliers are also under pressure. Domestic steel makers have sounded out a hike in prices by three to five per cent in December.

Japanese car maker Toyota Motor Corporation is launching its much-publicised compact car, Etios, in India next January. The car is expected to be slotted in the space where Maruti's successful models like Swift and Ritz are sold.

In addition, Ford India and Volkswagen are also expanding dealer network to extend the reach of their recently-launched compact cars, Figo and Polo. Both models enjoy an order backlog of more than three months.

Nissan Motor India recently added a diesel variant of its Micra compact car, launched earlier this year. Almost 50 per cent of compact cars sold in India run on diesel engines.

Nakanishi also mentioned that Maruti would stick to its plan of launching one model every year, in addition to offering upgrades and face-lifts. The company is also working towards launching its new plant at Manesar to address the waiting period.

"This year, we should be doing about 1.23-1.25 million vehicles. Then, there will be an addition of 250,000 capacity coming in from Manesar.

Then, there will be a third plant, which will add a further 250,000 capacity."

MSIL is collectively investing more than Rs 3,600 crore for adding an annual capacity of half a million units, which would take its total capacity to 1.7 million units.

Its newer models like Eeco, WagonR, Swift, Ritz and Swift Dzire are facing huge retail demand and according to company executives, all efforts are being made to bring down the waiting period.

Maruti sales rose 31.5 per cent in the eight months through October at 628,378 units, against 478,049 units in the corresponding period last year.

Nakanishi also said he did not expect the company's exports to breach last year's level of 147,000 units, following a fall in demand in the European nations. Maruti will explore markets of Australia, South-East Asia and South America to make up for the dip.

Meanwhile, the contract manufacturing tie-up with Nissan, which forces Maruti to supply 35,000 units of the A-star (rebadged as Pixo) per year, will be valid till 2013.