The recent price cuts in steel announced by Tata Steel have given Indian automobile manufacturers a much-needed breathing space.

The majority of Indian automakers - including Tata Motors, Maruti, Hyundai and Toyota - source their steel requirements from Tata Steel.

Tata Motors itself is expected to save more than INR200 million (based on the quantity of steel consumed in FY 2003-04) thanks to the price cuts. This will help the company in its cost reduction initiatives. Tata Motors is one of the largest consumers of steel inIndia as both its passenger car division and commercial vehicle division use the material. In fact, Tata Motors is expected to generate more savings from its commercial vehicles division as that buys a greater volume of steel from Tata Steel than the passenger car division does.

Tata Steel has reduced prices by INR2,000 per tonne. This is the first reduction after a slew of increases during the last year, which out manufacturers' margins under pressure and resulted in car prices being hiked a couple of times.

Even now, analysts point out, steel prices of steel are higher than last year and there is scope for them to reduce further.