"But it has reached a stage where we have to pass on a part of it to the customers," the official said.

The quantum of increase could be between Rs 5,000 and Rs 10,000 across different variants of the two models, the official said, adding the exact amount was being worked out.

HSCI's move follows Maruti Suzuki, which has also written to its dealers about an imminent price hike effective from next month.

MSI has, however, not communicated the quantum of hikes.

Rising steel prices in the recent past have made automakers to consider price hikes but a subdued market has made them think twice before biting the bullet.

Already two wheeler maker Hero Honda has officially announced a price hike of Rs 500-1,000 across its various products.

Before the announcement, Hero Honda ended 2.69 percent up at 769.85 rupees on the Bombay Stock Exchange, while the benchmark Sensex closed 0.11 percent higher at 16,715.74.

TFN.newsdesk@thomsonreuters.com yos/jro/ejp

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Hero Honda added that during the period it sold 33.37 million units compared with 33.36 million units a year earlier, defying the domestic two-wheeler industry which remained sluggish due to high interest rates and low availability of consumer finance.

Pawan Munjal, managing director and chief executive, said steadily rising input costs remain an area of concern and he expects the government to address these issues for the industry to be able to make a turnaround.

The company has declared a total dividend of 19 rupees per share.

Before the announcement, Hero Honda ended 2.69 percent up at 769.85 rupees on the Bombay Stock Exchange, while the benchmark Sensex closed 0.14 percent higher at 16,721.08.

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The carmaker may report a significant profit tumble as early as the fourth quarter of the current fiscal year, analysts predict.

Five analysts polled by Thomson Financial are forecasting Honda will report an operating income of 924.8 billion yen ($9.1 billion) on average.

In January, Honda had projected full-year operating profit of 920 billion yen and net profit of 690 billion on revenue of 12.15 trillion yen.

In the year to March 2007, the automaker posted net profit of 592.3 billion yen and operating profit of 851.9 billion yen on revenue of 11.1 trillion yen.

"The new Accord passenger cars, as well as the CR-V SUV and Civic compact cars contributed to relatively solid sales in the United States, allowing Honda to limit the impact of the subprime loan problem" on its earnings, Credit Suisse Securities analyst Koji Endo said.

Endo forecasts a year to March 2008 operating profit of 950 billion yen.

In calendar 2007, Honda sold a record 3.76 million vehicles across the globe, buoyed by fast-paced sales growth in emerging markets such as China and Russia.

But analysts warned that even Honda, which has so far shown some resilience in the U.S. market thanks to its rich line-up of fuel-efficient small cars like the Accord and the Civic, has also started to struggle in the January-March period.

"Given its high reliance on the U.S. market, it was unavoidable for Honda to see a major decline in profit in the January-March quarter," Nomura Securities analyst Shinya Naruse said.

Naruse expects Honda's operating profit to fall 42 percent to around 145 billion yen in the quarter ended March, after posting a 35-percent growth in the October to December period and a 48-percent surge in the July to September quarter.

In the January to March period of 2007, Honda posted net profit of 176.1 billion yen, operating profit of 250.2 billion yen and revenue of 3.09 trillion yen.

But analysts warn of a bigger profit risk in the current fiscal year.

"Honda's operating profit could fall by up to 45 percent in the first half to September alone, and decline by 36 percent in the full year to March 2009," Naruse said.

"The foreign exchange factor alone could push down annual profit by 32 percent," he said.

Other factors that would hit profitability are stiffer competition in the compact car segment in the U.S. and falling sales of SUVs and pick-up trucks due to higher gasoline prices, said Naruse.

Nomura currently has a "4" investment rating on Honda. This means the investment bank expects Honda shares to underperform the Topix index of all first-section shares on the Tokyo Stock Exchange by 5-15 percent over the next six months.

Takaki Nakanishi, an analyst at JP Morgan Securities, said in a note to clients that he expects a 31.4-percent decline in Honda's year to March 2009 operating profit to around 635 billion yen, citing the adverse impact of a strong yen, higher procurement costs and falling demand in the U.S.

"The forex factor alone can subtract some 106.5 billion yen off the operating profit, and the higher procurement costs can also reduce profit by another 52 billion yen," he said.

But Nakanishi has an "overweight" investment rating on Honda, citing its relative strength in the difficult U.S. market, its strong growth potentials, conservative business model of its financing unit and attractive product line-up.

yasuhiko.seki@thomsonreuters.com

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