SME Times News Bureau | 15 Sep, 2012
Carmakers, who are already battling sluggish domestic sales, fear that the latest diesel price hike would further hurt the industry's growth, primarily in the short-run.
Between April and August this year, overall passenger cars market grew just 7.42 percent and out of 100 vehicles sold, about 80 units were diesel versions.
However, the diesel price increase could bring some good news for the petrol sector, which might record a sales growth in the long run.
"Even after this hike there exists a difference between petrol and diesel prices. In the short-term, the diesel price hike may not have any impact on boosting sales," said General Motors India vice president P. Balendran.
"As the market continues to be subdued on account of high interest rates, in the long-run as the price differences between petrol and diesel reduces, sales of petrol vehicles will increase," he added.
A top industry expert, on condition of anonymity, said overall passenger vehicles sales would come down following the steep rise in diesel prices and the auto makers who did not have petrol versions in their portfolio would suffer the most.
"Following the hike, sales of small cars which do not have diesel versions may increase. Demands for CNG or LPG-driven vehicles will also rise," he observed.
Car sales fell for the first time in ten months in August, and motorcycle sales fell for the first time since January 2009.
Motorcycle makers also fear that the steep hike in diesel prices, came into effect Thursday midnight, would also dampen sales of two-wheelers indirectly.
"Diesel price hike will not affect motorcycle demands directly. But it will certainly have an indirect effect. As due to the fuel price hike, all over demands of the economy will slow down... it will also have an impact on demands for two-wheelers. So industry demand is expected to cool down further," said Mahindra Two-Wheelers Ltd vice president (marketing) Devendra Shinde.