Tata Motors has hiked the prices of its highest-selling passenger vehicles such as Nexon, Safari, Altroz, etc. To know how this step will affect the Shareholders and Customer read this blog!
Tata Motors has increased the price of their high selling passenger vehicles such as Nexon, Safari, Altroz, etc. by 1.8% which will be effective from the 8th of May 2021. This could be the good news for the shareholder but the bad news for customers. Let’s find it how?
Price Hike :
- As the commodity prices are going up the raw material cost is also increasing.
- The impact is seen in the sales as well. There was an increase in sales in the last 9 months, but it has come to halt now due to the second wave of Covid-19. The market might not see the same big impact as last year.
- There is price protection for the customers who have booked the cars before 7th May 2021. The new price will be effective from the 8th of May 2021.
- As of now, this price hike is effective only for domestic business.
Impact on Tata Motors:
- The material cost of Tata Motors is between 73% to 75% of the total revenue. It has been the same over the period.
- Due to commodity price hikes such as steel and precious metals they were left with no choice but to pass on this value to the customers. That is the reason why all the automobile companies have a plan to increase their vehicle prices.
- When input cost increases there is a decrease in the operating profit margins. This might impact net profit as well.
- To make less pain on these losses, there is a need for a price hike.
This business decision is good news for the shareholders. But from the customer's point of view, it is going to play on their pockets. In the future, if the commodity price cools down then the profitability will also be increasing. As it is not seen that the company decreasing its prices because of the commodity prices going down. Hence this could be a positive sign.