The Hindu Business Line : Auto part makers hit by rising input prices

However, it is not just Nano — all vehicle manufacturers are under pressure from their vendors to raise prices of the components they buy from them, thanks to the relentless increase in steel prices.

But, wait a minute. Didn’t steel producers slash prices last week? No, not really.

Last week’s price cuts by steel producers brought little cheer to auto components manufacturers because the drop in prices were not for those grades of steel that are used in making auto parts.

Hence, suppliers are a worried lot as a number of them are in the process of constructing dedicated manufacturing units near Singur, where the Nano will be produced.

The Chairman of Rane Group, Mr L. Ganesh, told Business Line, “The sharp increase in direct material costs have to be passed on to our customers. There is no way the component industry can absorb this. Vehicle manufacturers have already increased prices of their products and will continue to do so if this trend in costs continues. This applies to all products and customers and not just Nano.”

The auto component industry consumes alloy steels for manufacturing of high quality value added and safety components like drive, transmission and steering systems, chassis and suspension parts and a variety of other engine parts. Steel is used for making forgings or alloy steel castings, which are then worked upon to produce fully finished auto components.

According to the President of Automotive Component Manufacturers Association, Mr Sanjay Labroo, “The alloy steel has not been impacted by the price cuts at all, leaving the industry sandwiched between fixed-price supply contracts on one hand and the rising prices of steel on the other, which has severely impacted on the profitability of the industry.”

As the customs duty on alloy steels has not been reduced to zero and export duties have also not been imposed on export of alloy steels, the steel manufacturers have no pressure to cut the prices of alloy steels, he said.

Moreover, even in the non-alloy grades where prices have been reduced, these cuts have been made applicable only on open market sales and not to institutional sales, he added.