Hero MotoCorp to go for fourth price increase this year

Hero MotoCorp, already suffering from one of the worst demand slow-downs in recent times, said it is being forced to take a fourth round of price increase this year to offset the sharp increase in raw material prices.

The latest round of price increases will come into effect on Jan 4, and will be ‘up to Rs 2,000’ per bike, with the exact amount depending on the model and the market, the company said.

“The price revision has been necessitated to partially offset the impact of steadily increasing commodity prices,” it said.

The company had, before this, implemented three rounds of price increases in the current financial year, coming to a cumulative total of around Rs 3,000 per motorcycle.

The first round of around Rs 800 was implemented in April, the second round of Rs 1,200 was implemented in July and the third round of around Rs 1,000 was put into effect in September.

The price increases are being put in place to offset the sharp run up in commodity prices over the last one year due to the stimulus program of various central banks, particularly the US Federal Reserve.

Various central banks are pumping in hundreds of billions of dollars of money supply into the market every month, leading to the increase in prices of everything from bread to exotic paintings and cryptocurrencies.

Caught in the crossfire have been companies like Hero MotoCorp, which depend on raw materials like steel, aluminium and chromium.

The price of steel, the key commodity in auto manufacturing, has risen to three times what it was in early 2020 in the US, though the increase in India has been slightly less than that.

For Hero MotoCorp, the increases come at a particularly bad time, as the company saw a 43% decline in its two-wheeler sales for November due to a variety of factors, including lower demand from rural markets.

Speaking in November, the company’s finance head Niranjan Gupta had refused to say whether it would need to go for a fourth round of price increases, saying prices of key commodities had been starting to cool off.

“Some of the commodities have stabilized, or are coming off their highs,” he had said, adding that the company had not passed on the full cost of increased raw material prices to customers, and if the prices were to decline soon, it would not need to increase prices further.

However, going by today’s action, it would seem that the prices have not declined to a level where the company could hope to recover the increased costs without going for a fourth round of price increase.