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Diesel prices and auto volumes...
Mon, 21 Jan Pre-Open

When it comes down to it, the gradual hikes in diesel prices will either impact or not impact car sales volumes. As per the Society of Indian Automobile Manufacturers (SIAM), diesel cars formed less than one-third of the total car sales volumes in 2010 - 28% to be precise. In 2012, this figure has more than doubled to 58% in 2012.

Over the past two years, what has really risen the demand for the vehicles is the difference between the per litre cost of the two fuels - petrol and diesel. The petrol variants of the vehicles were priced much lesser as compared to their diesel variants. Despite the same, it did not deter buyers from purchasing the latter.

It would not be entirely wrong to say that given the political sensitivity surrounding the hiking of diesel prices. Diesel finds usage in many aspects apart from transport. Therefore, people especially in urban India, would have never expected the difference between the prices of the two fuels to go down so much.

Auto companies are of the view that the hike in diesel prices should not affect the demand for vehicles. At least that is what has been told to some business dailies. To some extent, this would hold true in the case of utility vehicle and truck manufacturers - where majority of the vehicles run on diesel. However, when it comes down to sedans and passenger cars, there definitely would be competition from the relatively lesser priced versions of petrol cars.

However, one strong advantage for the auto manufacturers would be that this development would allow them to take better decisions in terms of investments and future plans. A handful of vehicle manufacturers had expressed their interest in setting up diesel engine plants and/or launching new variants in the diesel category. With such news, their long term plans can be devised in a better manner and their expectations could go less awry on the back of better clarity.

Nevertheless it would be interesting to see how the market dynamics change over the long term. Apart from competition within the four-wheeler segment, one must not leave out two-wheeler from the equation as well.

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