Saturday, November 12, 2011

Wait increases for diesel cars, petrol vehicles go on discount

Change in buyer preference brought about by differences in auto fuel prices

It may be the best time to pick up a petrol car with heavy

discounts. But, in case you are looking for a fuel-efficient diesel model like the Verna sedan or Swift hatchback, the wait has gotten even longer ranging from eight to ten months. This is despite a slowdown in the auto sector caused by high interest rates and firm fuel prices.

Maruti Suzuki, Hyundai Motor and Volkswagen cars dealers are grappling with high bookings for diesel models while trying to push petrol cars with discounts ranging from Rs 18,000 to Rs 44,000. Leading car companies such as Maruti Suzuki and Hyundai Motor are facing a shortfall in diesel engine capacity. "There is no discount on any diesel model. Even for models such as SX4 with factory fitted CNG kits, there is no discount owing to better demand as compared to petrol cars," said Nishant Kumar, a sales executive at Rana Motors, Maruti Suzuki's top dealer.

This comes from a series of petrol price hikes affected since this year. From Rs 58.37 to a litre of petrol in January 2011, the price moved up to Rs 66.84 to a litre at present, representing a 14 per cent increase. In the national capital region like Gurgaon, Faridabad, Noida and Greater Noida, petrol is more expensive at Rs 73.55 per litre owing to additional taxes levied by both Haryana and Uttar Pradesh governments. For that matter, even diesel has become expensive and moved to Rs 40.91 per litre at present compared with Rs 37.75 in January 2011, an increase of eight per cent.

The widening gap between two fuels has led to a severe dent in petrol car sales. While petrol car sales have fallen as much as 15 per cent between April and October 2011, diesel car sales have seen an increase of a staggering 21 per cent, according to the country's largest carmaker, Maruti Suzuki. The swelling petrol prices have taken a toll on overall car sales, which saw a five per cent fall to 1.04 million units between April and October 2011 compared with 1.10 million sold in the year-ago period.

However, the diesel consumption picture tells a different story. According to petroleum planning and analysis cell (PPAC), diesel consumption fell by as much 17 per cent between April and September 2011. The diesel consumption stood at 5.46 million tonnes in April 2011 only to reduce to 4.60 million tonnes in September 2011.

When contacted, RK Singh, chairman of Bharat Petroleum (BPCL) said the fall in consumption of diesel is a natural result of slowdown in general economic activity in the country. "Diesel consumption in a very strong way is related to slowdown in GDP growth and another reason being high interest rates. Even if you look at the past, diesel growth (consumption) is directly linked to economic growth," he added.

Apart from automobiles, diesel is used for various industrial applications such as generators, water pumps, farm equipment and telecom towers. Even petrol consumption, for that matter, has marginally reduced to 1.19 million tonnes in September 2011 from 1.20 million tonnes recorded in April 2011.

Diesel cars that accounted for 31-32 per cent of overall car industry sales in April 2011, now account for as much as 48 - 50 per cent, said Shashank Srivastava, chief GM (marketing) at Maruti Suzuki. Earlier this year, analysts predicted that the diesel cars may account for half of overall car sales only by next three years.

"Even for Maruti's models that have both diesel and petrol options, ratio for diesel has gone up to 85 per cent as compared with 65 per cent two months ago," said Srivastava. "Our expectation was of selling 8,000 diesel cars a month, but the demand has been much more. This is the reason for huge waiting period on i20 and Verna," a Hyundai Motor India spokesman said.

Even for CNG, carmakers have seen a surge of almost 60-70 per cent in demand for pre-fitted CNG cars. "We used to sell 1,800 cars a month with factory fitted CNG option. Now, we are selling 3,000 a month," Srivastava said. As for the economics of owning a car, if one travels up to 1,500 kms a month it is widely estimated that one should settle for a petrol car. Buying CNG cars makes sense if the travel is 1,800 kms a month while for diesel travel should be a minimum of 2,300 kms per month, according to dealers.

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