Vehicle majors see less benefit from steel price cut

Commercial vehicle majors see limited benefit from steel price cut

New Delhi: The recent cut in steel prices has failed to enthuse automobile manufacturers, as steelmakers while cutting cost in the spot market have not renegotiated existing contracts with original equipment manufacturers (OEMs).

Major commercial vehicle manufacturers such as Tata Motors, Ashok Leyland and Eicher have said their input costs largely remained unaffected by the price cut.

More India business stories | Stock tips on your mobile

Automobile makers say the price cut has happened mainly at the retail level and its impact on their long-term contracts remains to be seen. Last week, major steel producers announced price reduction for flat steel by Rs 4,000 a tonne.

“The price cut has been at the retail level. But OEM contracts are long-term where we do not know how much difference it will make. So we will wait and watch over the next 10-15 days before taking a decision,” said Prakash Telang, Executive Director, Commercial Vehicles, Tata Motors.

Last month, Tata Motors and Ashok Leyland increased prices of their commercial vehicles by 2.5-3.5 per cent.

Ashok Leyland said as the company had passed on only a partial impact of the steel price, it would be difficult to roll back its vehicle prices.

“We had not passed on the entire increase in our steel cost to customers. So even if there has been some price cut, we are absorbing the costs to a certain extent on our own,” said Rajive Saharia, Executive Director, Marketing, Ashok Leyland.

Companies also say that apart from flat steel, whose prices have been cut, prices of forging steel and other speciality steels used in making certain parts have not come down.

“There are other varieties of steel whose prices have not seen any decline due to which companies still remain under pressure on the cost front,” said a senior official from Eicher Motors Ltd.