No festive cheer for auto makers

Toyota, Ford and VW are mulling price increases to offset the rise in input costs because of a weak rupee

The coming festive season seems to be offering little cheer to car manufacturers, with most expecting demand to remain muted because of the depressed economy.

Sandeep Singh, deputy managing director (marketing and commercial), Toyota Kirloskar Motor, said, “Festive season should be better than the last few months. But I do not expect the kind of buoyancy that is witnessed in other years. Industry sales may dip by about 10 per cent. While small towns are expected to perform better, bigger cities will continue to pose a challenge.”

Concurred Pawan Goenka, president (automotive and farm equipment divisions) at Mahindra & Mahindra (M&M): “We expect sales in the festive season to be better than in July and August but less than what we saw last year, as the market situation is difficult.”

M&M has reported a decline of 28 per cent to 15,821 units last month. On an average, passenger car sales increased 20 per cent during the festive season but such a spurt is unlikely this year. Toyota, Ford and Volkswagen are mulling price increases to offset the rise in input costs because of the depreciation of the rupee, while Ford India and Honda Cars have decided to step up exports. M&M and Honda Cars India have also decided to go ahead with investment plans for new products and capacity expansion in anticipation of better times. Said Sandeep Singh of Toyota, which has posted a drop of around 30 per cent in volumes in the first four months of the financial year: “We will export 25,000 units this year compared to 20,000 units last year.”

Honda is not considering any immediate price increases but is working on raising exports to counter the impact from rupee depreciation. Jnaneswar Sen, senior vice-president (marketing and sales), Honda Cars India, said: “Last year, we exported components worth Rs 250 crore and 2,500 vehicles. This year, we will export Rs 600 crore worth of components and 6,000 cars.”

Ford is looking at increasing exports to 50 global markets in four-five years from India. The company currently exports small cars to 37 markets worldwide and is planning to add more countries by shipping EcoSport to Europe, Australia, New Zealand and Taiwan.

With the rupee declining 20 per cent, car makers are considering price increases to offset rising import costs. Toyota, for one, is mulling a price increase of its products from October. Ford India, too, said it was considering raising prices.

Joginder Singh, president and managing director, Ford India, said: “Input costs are increasing, so are the freight costs. The rupee depreciation has had an impact on our margins. We have been absorbing it for a while but our capacity to absorb further is very less now. We are assessing and monitoring the situation and we are contemplating to pass it on the consumers.”

German auto maker Volkswagen is expected to take a call on price increase by September 10.