Diesel Price Hike to affect Festival Car Sales

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Although automotive industry at large well-received Thursday’s hike on diesel price by Rs 5, a section of it feel that this shift is ill-timed. The demand for diesel cars has increased lately across all segments due to host of factors. Moreover, there is a huge difference between the prices of diesel and petrol that led to more demands of diesel-powered vehicles.

Few months back, the industry sorted out diesel price hike and tax payment of diesel cars, but this unexpected move caught the auto industry by surprise as the market is in ‘negative zone’ at present, according to one of the officials from a major automaker. Since customers are ‘price sensitive’, it will directly have an effect on diesel car sales. However, it is believed that the running cost of a diesel powered vehicle will increase that may give some positive push.

Usually during festival season, there will be large demand and few automakers feel that their expectations may get washed away this time. Pravin Shah, CEO of M&M, said that they were expecting the diesel price hike as there was a huge price gap between petrol and diesel, but didn’t think that the announcement would be made this soon as they weren’t prepared for it. Mahindra and Mahindra is one of the biggest makers of diesel utility vehicles; though their diesel portfolio is expected to suffer due to price changes, they are looking forward to remain unharmed. Their utility vehicle segment has expanded 57 percent this year and hopes to continue in the same path in the remaining half. The price change may defer the demand slightly, yet this festival season will be better than previous, he added.

Other segments, like passenger vehicle saw an average demand this year due to growing fuel prices and rising interest rates. The medium passenger vehicle segment grew at 18.5%, while the larger passenger vehicle segment by over 7.42%. It is believed that diesel price hike will affect commercial vehicle industry than others as its sales remained already negative during this year.

Industry players are still hopeful that the upcoming season may soften the already slowing down passenger vehicle segment. Other automakers, including Honda welcome this move as they feel it brings demand to petrol cars, though the difference between two fuels remain large, between 20 and 22. Tata Motors was found to be little bit optimistic in this regard; one of the spokesperson from CV manufacturer said the increase in diesel price is good for Indian economy and if it improves, it’ll indirectly boost the auto industry too.

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