After announcing two hikes in the past year, in January and then in April, automobile manufacturer Maruti Suzuki India Ltd will roll out another price hike in September. This hike is expected to be significant—some sources have been quoted to say 3-4 percent—as compared to the previous two hikes of 1.4 and 1.6 percent respectively.

What is behind this jump? Owing to the pandemic, prices of raw materials—called ‘commodity prices’ in economics—have jumped significantly since April 2020. This includes metals such as steel and copper, which are key in automobile production. Additionally, the uncertainty in demand, although short term, has only added to carmaker woes. “We tried improving our efficiency and manage it hoping that the prices would soften. But they have been hardening and we are left with no choice but to go for another hike. This time it would be a substantial hike,” said Shashank Srivastava, Senior Executive Director, Marketing & Sales at Maruti Suzuki, in a media briefing.

Rare metals, crucially, have been climbing the charts. Going by numbers provided to the media by Shrivastava, the price of metals, such as Rhodium, went from ₹18,000 per gram to over ₹64,000 per gram. Such rare metals, as Shrivastava also pointed out, are key under the BS-VI norms for motor vehicles that kicked in last year. Resistant to corrosion, rhodium is especially high in demand among car makers.

Another possible cause behind the hike in rhodium prices is the impact of the pandemic on global supply chains. South Africa, which constitutes 80-90 percent of global productions, has faced significant setbacks due to COVID-19. Old mines have not become fully functional, and the new ones are failing to keep up with rocketing demands.

Rising production costs have forced Maruti Suzuki’s hand. How its competitors will respond to these challenges remains to be seen.