New Delhi: Tata Motors Passenger Vehicles Managing Director Shailesh Chandra Friday said the company is weighing further progressive price increases as rising commodity costs continue to put pressure on margins.
In an interview to PTI, Chandra said the company is still absorbing a significant residual part of the rise in commodity costs, while also accelerating its cost reduction efforts.
“Still, there is a significant residual part of the commodity increase that we are absorbing, which has been hitting our markets, but at the same time we have been pacing our effort on the cost reduction side. We are reviewing every month in terms of when we’ll have the opportunity to take a certain level of price increase,” he said.
“But whenever we take the price increases, it will be in smaller escalations, so that it does not immediately impact the demand. So, it will be progressive, incremental price increases that we’ll take over a period of time. We have taken one price increase in September itself, so the next price increase is too premature to tell you because we have to review when we can do the next price increase,” the Tata Motors Passenger Vehicles MD shared.
​Earlier this month, Tata Motors announced a price increase of up to 1 per cent across its commercial vehicle segments starting October 1.
Chandra observed that price increases by manufacturers since the implementation of GST have been below 5 per cent, while auto makers have also seen discounts recede amid supply being slightly behind demand.
“It could be a sub-5 per cent price increase so far by any manufacturer, from the time of GST. Even after GST, opportunistically OEMs (original equipment manufacturers) could have taken a price increase more aggressively, right? But rather, after GST there were more discounts also in the market. I think the first thing which has gone away is the discount because of the supply being more or less slightly behind the demand,” he said.
Chandra added that the inability to pass on commodity-cost increases at the same pace was putting pressure on margins, requiring greater focus on cost reduction.
“It is not possible to pass on these increases to the market at the speed at which prices have been used on that side. So that remains a matter of concern, which creates immense margin pressure and immense effort from a cost reduction perspective,” Chandra said.
He said uncertainty around commodity prices was also a concern, while ruling out any major alert on the supply or production side at present.
Separately, Tata Motors Passenger Vehicles on Friday announced the launch of the all-new Tata Aeris, a compact sedan designed exclusively for personal car buyers, with a starting price (ex-showroom) of Rs 5.29 lakh for petrol and Rs 6.29 lakh for iCNG.
Talking about compact sedans, Chandra said though their share has been declining in the overall sedan segment, their volumes have been increasing.
“In just the last one year itself, it has grown by about 25-26 per cent, so it is a growing segment in terms of size. It also has a GST impact. So there is a clear section of customers who are looking for a compact sedan,” he said.
PTI
