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In a meeting of the Development Council for Automobile and Allied Industries (DCAAI) under the ministry of heavy industries and public enterprises held last month, SIAM President and Managing Director of Tata Motors Ravi Kant said that the problems being faced by the industry were not six months old but have been persisting for the last year and a half.
"Raw material costs account for 60-70 per cent of the total cost and with steel prices going up by 40 per cent in the recent past, overall costs have gone up by 15-20 per cent completely eroding the profitability of the sector," Kant said.
"The financial results of most of the automotive industry players for Q3 (Oct-Dec 08) and Q4 (Jan-Mar 09) will be devastating."
Despite a fall in primary steel prices, prices of auto grade steel have not come down and there is likely to be an increase in prices of cars, two wheelers and commercial vehicles in January. Hyundai, Maruti and Toyota have already indicated of such plans.
Falling demand for automobiles, which has impacted all three segments, has got everybody worried.
"It is critical that the sector is turned around and if steps are not taken in the next 2-3 months, irreparable damage may be caused," said Pawan Goenka, president automotive sector, M&M. "Speed of action is of essence."
To see more of the Hindustan Times or to subscribe to the newspaper, go to http://www.hindustantimes.com. Copyright (c) 2009, Hindustan Times, New Delhi Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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