Tata Motors Ltd (TTM), one of the largest automobile companies of India, has announced the increase in prices of some of its passenger and utility vehicles, effective from the first day of April, 2011. The decision to raise prices of vehicles comes on the back of an unavoidable surge in input costs and a hike in interest rates, despite the cost control measures by the company.

According to the company, the price increase in passenger cars, depending upon the model, will vary between INR 7,000 ($156) and INR 15,000 ($334). Specifically, Indica prices will be raised by INR 7,000 ($156) to INR 9,000 ($200), Vista and Indigo CS by INR 8,000 ($178) to INR 11,000 ($245) and Manza by INR 10,000 ($222) to INR 15,000 ($334). Besides, prices of the utility cars will be increased by INR 13,000 ($289) to INR 36,000 ($801), again depending upon models. For instance, Sumo prices will go up by INR 13,000 ($289) to INR 15,000 ($334), Grande by INR 16,000 ($356) to INR 19,000 ($423), Safari by INR 18,000 ($400) to INR 29,000 ($645), Aria by INR 30,000 ($667) to INR 36,000 ($801) and Venture by INR 9,000 ($200) to INR 12,000 ($267).

Apart from Tata Motors, rising material costs and shortage of components, have also forced other big automakers to behave accordingly. Volkswagen, General Motors Company (GM), Hyundai Motors and Maruti Suzuki India have also raised the prices of their products.

The global auto industry, including the Indian car market, is improving at a galloping pace mainly driven by the flourishing middle class, rising salaries, growing employment opportunities, infrastructure development and easier access to car loans. Moreover, shifting of manufacturing facilities to low cost destinations such as China and India by global automakers and creation of joint ventures and alliances with the domestic companies by the same are providing additional momentum to the booming auto industry worldwide. Inspired by these improvements, global passenger car sales are projected to reach 76 million units by 2015.

However, gradual rise in input costs and interest rates are the potential headwinds for the growing prosperity in the auto industry. Steel prices and prices of tires have gone up considerably. These factors are likely to make cars more expensive, thereby limiting its demand.

 
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