The U.S. federal reserve has recently adopted a ‘monetray policy’ which is very tight. This comes after nearly five years of easy monetary policy during stimulus package adopted by the government of the United State of America. One result of this tight policy is the quick depreciation of Indian rupee against U.S. Dollars. Indian Rupee continued to fall in value and has now reached a record fall of nearly sixty Rupees against one American Dollar. There is no chance the downward depreciation trend would be arrested soon. Many car manufacturers are apprehensive of the depreciation of the Indian Rupee as they import the car components from overseas and have to pay the prices in U.S. dollars. This means the car manufacturing companies are left with no option but to pass on the increase in the prices of components to the customers. Thus the falling Indian Rupee has started a domino effect, the prices of the parts increase because they are imported from other countries and the companies in turn try and pass off the increase to the buyers of the cars.
Though so far the prices of the new cars in the market have not increased but many car manufacturing units, based in India, are thinking of increasing the prices of their vehicle to offset the depreciated value of the Indian Rupee against U.S. Dollars. Both General Motors and Toyota announced that they are thinking about the situation and are likely to increase the sale ‘price of their’ models to offset the loss suffered due to depreciation of Rupee. Toyota India says that they are watching the situation and would take appropriate action when the time comes. GM has already hiked their ‘prices’ of the models but are watching the situation closely. Honda says that it has no plans to increase the price of their cars and Maruti India comes out with the news that so far they have no intention to increase the prices of their cars but are watching the scene carefully.