MBA103: MANAGERIAL ECONOMICS

CNG VEHICLES HAVE ARRIVED

Asst. Prof. Sovan Mangaraj
Astha School of Management
sov.mba@gmail.com

STUD CASE

LYSIS Y AN A

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MBA103: MANAGERIAL ECONOMICS

CASE STUDY ANALYSIS

Case Study Analysis is a tool to bridge the gap between conceptual learning and application skill of a student. A case is usually a description of an actual situation, commonly involving a decision, challenge, opportunity, a problem or an issue faced by a person or persons in an organization.

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MBA103: MANAGERIAL ECONOMICS

CNG Vehicles Have Arrived in car CNG has grown into one of the major fuel sources used
engines globally. In all, more than 28 CNG models are in production globally by Audi, Fiat, Ford, Honda, Hyundai, Lincoln, Mercedes-Benz, Opel, Peugeot, Renault, Toyota and Volkswagen. Some of the countries have taken big lead in this field; Pakistan tops the list with more than 60 percent vehicles running on CNG followed by Armenia (32 percent). The main factors causing this rapid growth included the current energy crisis, increasing environmental awareness, and the price differentials between CNG and petrol. A look at prices will make the point more clear. In India CNG costs are at Rs. 30.00 per kg compared with Rs.67.00 per litre petrol. Although India has only 1.3 percent of its vehicles running on CNG, but New Delhi is home to the largest fleet of CNG public transportation vehicles in the World, because the use of CNG is mandated for the public transport system of New Delhi. Consumers throughout the country are following suit. Automakers are currently vying for marketing positions to

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MBA103: MANAGERIAL ECONOMICS

CNG Vehicles Have Arrived

CNG has grown into one of the major fuel sources
used in car engines globally. The main factors causing this rapid growth included the current energy crisis, increasing environmental awareness, and the price differentials between CNG and petrol (In India CNG costs are at Rs. 30.00 per kg compared with Rs.67.00 per litre petrol.) Pakistan tops the list with more than 60 percent vehicles running on CNG. Although India has only 1.3 percent of its vehicles running on CNG, but New Delhi is home to the largest fleet of CNG public transportation vehicles in the World, because the use of CNG is mandated

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MBA103: MANAGERIAL ECONOMICS

CNG Vehicles Have Arrived

Questions: What is the relation between the demand for CNG and petrol? What will be the impact on demand for CNG if price of petrol declines? In your opinion, what could be the reason for difference in usage of CNG in India and Pakistan? What more information do you need to give a conclusive answer?

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MBA103: MANAGERIAL ECONOMICS

What is CNG?

Compressed Natural Gas (CNG) is a fossil fuel substitute for gasoline (petrol), diesel, or propane/LPG.
CNG is made by compressing natural gas (which is mainly composed of methane [CH4]), to less than 1% of the volume it occupies at standard atmospheric pressure. It is stored and distributed in hard containers at a pressure of 200248 bar (29003600 psi), usually in cylindrical or spherical shapes. CNG-powered vehicles have lower maintenance costs when compared with other fossil fuel-powered vehicles. Compressed natural gas vehicles require a greater amount of space for fuel storage than conventional gasoline powered vehicles.

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MBA103: MANAGERIAL ECONOMICS

Related Theory

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MBA103: MANAGERIAL ECONOMICS

Related Theory

SUBSTITUTION EFFECT
An effect caused by a rise in price that induces a consumer (whose income has remained the same) to buy more of a relatively lower-priced good and less of a higher-priced one.

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MBA103: MANAGERIAL ECONOMICS

Related Theory

CROSS ELASTICITY OF DEMAND

In economics, the cross elasticity of demand measures the responsiveness
of the demand for a good to a change in the price of another good.

It is measured as the percentage change in demand for the first good that
occurs in response to a percentage change in price of the second good. For example, if, in response to a 10% increase in the price of fuel, the demand of new cars that are fuel inefficient decreased by 20%, the cross elasticity of demand would be:

A negative cross elasticity denotes two products that are complements, while
a positive cross elasticity denotes two substitute products.