CARMAKERS are poised to increase new car prices for the first time in years in response to steep rises in steel and energy costs.

Corus, the Anglo-Dutch steelmaker, is expected to raise prices to the automotive industry by an average 20 per cent in the next few weeks, blaming soaring costs in raw materials.

Nissan, the UK’s biggest carmaker, said that manufacturers were nervously eyeing their rivals and predicted that once one price rise was introduced, all the leading producers would follow suit.

A spokesman said: “We want to avoid passing the increased costs on to the consumer just yet, not least because the retail market is so competitive. However our marketing team is watching competitors, reckoning that they may be forced into action either by cutting incentives or by reducing standard specification or by simply raising prices.”

Nissan recently halted production at three of its plants in Japan for several days because of a steel shortage amid a tight global market for the metal triggered by China’s economic boom.

Philippe Varin, Corus’s chief executive, said that he could not see how carmakers could absorb the increases and that they would have to raise their prices. Corus has said its imminent price increases could be followed by further rises in the spring.

Carmakers will also have to take their share of £1.8 billion of extra energy costs estimated to face industry this year from continued high power prices and the new emissions trading scheme.

Glass’s, the car market analyst, has forecast an early rise in prices of about 2.5 per cent. Alan Cole, of Glass’s, said consumers may be enticed to pay higher prices because of a deluge of new models coming on the market this year.

Prices of prestige cars, which have maintained their premium prices despite difficult markets, are forecast to rise about 1.5 per cent.

Higher prices may suppress sales, leading to further tailing off of new car registrations. Figures due from the Society of Motor Manufacturers and Traders this week are expected to show that 2004 sales fell slightly short of 2003’s record of 2.579 million. It is expected that sales missed the record by about 5,000.

List prices of cars rose by an average 3.1 per cent last year, but competitive incentives held down the cost to the consumer.

Intense price competition has dominated the car market for more than four years since the Competition Commission declared prices to be unduly high in the UK compared with other European countries.

Toyota said high steel prices would hit parts suppliers and could increase sourcing from overseas by UK manufacturers.

A typical car may require more than 770kg of steel. Steel sections form the sub-frame and safety cage, while engineering steels are used in many of the engine and transmission components. Tyres are reinforced using steel wire.