If you have been planning to buy a new car, SUV, or commercial vehicle, you may want to keep an eye on prices. Automobile manufacturers in India are facing growing pressure to increase vehicle prices as the cost of key raw materials continues to rise.

Steel, rubber, aluminium, copper, semiconductors, and other essential inputs have become more expensive, increasing manufacturing costs for automobile companies. With the festive season approaching, manufacturers now face a difficult choice: absorb the higher costs and accept lower margins or pass the additional burden on to customers through price hikes.

Why Are Car Prices Under Pressure?

Raw materials make up a significant portion of vehicle manufacturing costs. Steel is particularly important because it is extensively used in vehicle bodies and other components.

Tata Motors' commercial vehicle business has highlighted the pressure from higher commodity costs, with steel accounting for a substantial share of manufacturing expenses. Rising prices of aluminium, copper, rubber, and other materials are adding to the pressure.

Copper has become increasingly important because of its use in electric vehicles and their electrical systems. Higher demand combined with rising prices could therefore affect the cost of producing EVs as well.

Auto Component and Tyre Makers Are Also Feeling the Pressure

The impact of rising commodity prices is not limited to car manufacturers. Auto-component and tyre companies are also dealing with higher input costs.

Steel, copper, aluminium, and semiconductor prices have reportedly increased significantly, while electricity, transportation, and labour costs have also added to the overall cost burden.

Tyre manufacturers have already implemented price increases in some cases, and further increases could eventually affect vehicle prices and replacement costs for consumers.

How Much Have Some Raw Material Prices Increased?

Mahindra & Mahindra CFO Amarjyoti Barua has highlighted the sharp rise in several commodity prices. According to the company's comments, copper prices have increased by around 10%, steel by approximately 24%, and rubber by about 53% this year.

Automakers have already taken some measures to offset these increases. However, continued commodity inflation could make it difficult for manufacturers to absorb the entire increase indefinitely.

Some Automakers Have Already Raised Prices

Several automobile manufacturers have already taken steps to increase prices.

Maruti Suzuki implemented an average price increase of around 0.5% in June and had indicated the possibility of another increase. Honda Cars India also increased prices in August.

Hyundai Motor India, meanwhile, has been focusing on cost management while evaluating its pricing strategy.

If input costs remain elevated, more manufacturers could follow with additional price increases.

Why Is the Festive Season So Important?

The festive season is one of the most important periods for India's automobile industry. Consumers often prefer making major purchases such as cars, SUVs, and two-wheelers during this period, helped by discounts, new launches, and attractive financing offers.

However, higher vehicle prices could make some buyers reconsider their purchase or postpone it.

This creates a challenge for manufacturers. Raising prices can protect profit