The Hindu Business Line : Auto cos seek price cuts from vendors

Snapshot
Maruti Suzuki to start negotiating its term of contracts with vendors for the next 6 months
Domestically steel prices dropped by 44 per cent to Rs 21,270 a tonne

Priyanka Vyas

New Delhi, Oct. 23 It is now the turn of automobile companies to ask their vendors for a price revision. They want their suppliers to cut prices as commodity prices dip globally.

Till a few months ago, component suppliers were urging automobile manufacturers to increase prices citing the rising input costs, including that of raw materials.

Companies such as Mahindra & Mahindra, Maruti Suzuki and Tata Motors are likely to evaluate options by which their suppliers can offer them a price advantage from the falling commodity prices, including steel, iron and copper.

“When prices go up component companies ask us to revise prices. So now when prices are falling we are asking them for a price cut,” Dr Pawan Goenka, President, Automotive Group, Mahindra & Mahindra, told Business Line.

Similarly, Maruti Suzuki will start negotiating its term of contracts for the next six months. “For steel, we source for our vendors on an aggregate basis. We will seek the best price that we can get in renewal of contracts. If there is a drop in other commodities too, we will work with our suppliers accordingly,” said Mr Ajay Seth, Chief Financial Officer, Maruti Suzuki India Ltd.

Declining to share specific details on pricing with its vendors, Tata Motors spokesperson said, “It is a continuous process of review and decision making.”

Copper prices down

Copper, which is used in wiring harness system and other components, has witnessed a 50 per cent fall in its prices globally to $4,498 a tonne on Tuesday on the London Metal Exchange compared with $8,940 a tonne at its peak on July 7, 2008. Aluminium prices have plunged to $2,076 a tonne, a 38 per cent drop over the last three months. Steel, the main raw material used in engine parts, has seen prices moving downwards by 34 per cent to $700 a tonne on the benchmark price for East Asia.

Domestically too, steel prices dropped by 44 per cent to Rs 21,270 a tonne. Copper prices fell in a similar proportion by 41 per cent to Rs 226.40 a kg and aluminium declined to Rs 102.25 a kg as on Tuesday on the NCDEX compared to their peak prices in July this year.

Though falling prices could be give some respite, automobile and component companies are now calculating how the fall in the rupee could offer them an advantage.

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