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There is increasing pressure on Indian auto companies to increase vehicle prices before the festive season. The prices of essential raw materials like steel, rubber, aluminium, copper and semiconductors have increased rapidly. Due to this, the cost of production is increasing and the profit margin is decreasing.

This pressure has come at a time when demand for passenger vehicles, two-wheelers and commercial vehicles has been strong in the beginning of financial year 2027. Companies now face a dilemma: either absorb the increased costs themselves and accept lower profits, or pass the burden on to customers by raising prices. Increasing prices risks reducing sales during the festive season.

Rising prices of steel and other commodities
According to media reports, Tata Motors MD and CEO Girish Wagh said that the commercial vehicles business is under pressure due to rising commodity prices. Steel accounts for about 40 percent of the cost. He said unless the safeguard duty is removed, there is little chance of a major fall in steel prices. Prices of rubber, aluminum and copper have also increased; Especially the demand and cost of copper is increasing because copper is used more in electric vehicles. Wagh indicated that commodity inflation could be a major challenge in the second quarter (Q2), and the company may increase prices if costs do not come down.

Auto parts and tire companies also under pressure
Rising costs have also affected auto parts and tire companies. Sona Comstar MD and Group CEO Vivek Singh said that he has seen the highest increase in the prices of steel, copper, aluminum and semiconductor in his 11-year career. Costs to electricity, transport and labor have also increased. CEAT MD and CEO Arnab Banerjee also said that the company may have to increase tire prices in future. CEAT had earlier raised prices on July 1 and has also received index-based price hike from OEMs.

Rising inflation figures raise concerns
According to Amarjyoti Barua, CFO of Mahindra & Mahindra, the prices of copper, steel and rubber have increased by about 10%, 24% and 53% respectively this year. The company has raised prices by an average of 1.5% to 2.7%, yet cost pressures remain. Companies have already increased prices
Maruti Suzuki raised prices for the first time this financial year in June, with an average increase of 0.5%, and has hinted at further hikes from August. Honda Cars India had also increased prices from the beginning of August. At the same time, Hyundai Motor India is currently adopting a strategy of reducing costs and setting prices carefully before taking any additional steps.

The real challenge during the festive season
The festive season is important for auto companies, because vehicle sales usually increase during this period. However, if prices continue to rise, customers may postpone their purchases.

Companies are currently adopting a variety of strategies: absorbing costs, cutting costs and raising prices. However, it will be difficult to bear the burden of rising raw material costs in the long run. As a result, there remains a possibility of further price increases in the coming months. The main question is how long will customers accept these increased prices and at what level demand will start declining.