THE AUTOMOBILE

SECTOR AND FUEL

PRICE RISE

Faiz Dodhia

INTRODUCTION

Components of fuel

Price List of Petrol in Surat

Dec 17, 2010: Rs.52.59 per litre

Feb 09, 2011: Rs.52.91 per litre
May 16, 2011: Rs.58.37 per litre
Aug 15, 2011: Rs.63.37 per litre
Nov 16, 2011: Rs.66.84 per litre
Jan 4, 2012: Rs.68.64 per litre
Aug 7, 2012: Rs.73.18 per litre
Oct 16, 2012: Rs 75.82 per litre
Dec 23, 2012: Rs. 73.56 per litre
Feb 6, 2013, Rs. 71.59 per litre
Today: Rs 69.39 per litre

Overview: The shift of

demand

Ever rising cost of petrol is hitting the

demand of petrol.
Demand already at stake, each time hike
each time situation worsens.
CNG is not able to compete petrol in
terms of efficiency.
All eyes on Diesel fuel.

Overview: Consumers
response

Passenger car sales in India witnessed the slowest

growth during April in 10 years at 3.4 per cent as
customer sentiment remained low due to postBudget price hikes and high interest rates,
affecting the entry-level segment most.
The consumers are either switching to diesel cars
or are making up their minds for smaller and
efficient segment cars instead of luxury cars.
Last fiscal year experienced 20.2% decline in
sales of Petrol vehicles and 37% growth in diesel
cars.

Consumers worry:
There is a blur image of prices
coming down.
People fear just like CNG, the
prices of diesel would rise as
well.
Costly petrol, cheaper cars;
Cheaper Diesel, costly cars.

Industrial perspective:
Sugato Sen, Senior
Director, Society of Indian
Automobile
Manufacturers (SIAM) :
"Petrol cars are not selling
as such already. With this
record hike, the situation will
go from bad to worse. In the
short-term, sales would be
further affected while in the
long term, a negative
consumer sentiment will be
created, which might as well

Industrial Perspective:
Terming the latest price hike
as a 'disaster', Maruti
Suzuki India Managing
Executive Officer,
Marketing and Sales
Mayank Pareek lamented:
"This will further increase
the skew between petrol
and diesel vehicle demand,
which is already very wide.
This will severely affect the
sales of entry level cars,
which are mainly petrol
driven The overall impact of

Industrial Perspective:
Hyundai Motor India Ltd
Director Marketing and
Sales Arvind Saxena said:
'Demand is already under
pressure on account of
inflation and high interest
rates. An increase of such
magnitude is neither good
for the customer nor for
industry'.

Impact on the Automobile

Industry

Auto industry sees demand slump

due to fuel price hike: Most Indian
automakers rely heavily on petrol driven
vehicles. The new price hike could deter
buyers from opting for petrol cars and
two-wheelers. This will directly impact
revenues and profits for automakers that
have a petrol-heavy portfolio.

Impact on Automobile
Industry.

Ramping up Diesel capacity: Maruti Suzuki,

Indias largest carmaker, is looking to
expanding its capacity from 240,000 diesel
cars a year in fiscal 2012 to 300,000 in the
current one. It is also sourcing 100,000
additional diesel engines from Fiat, according
to an earlier report from Kotak Institutional
Equities. Hyundai Motor India is setting up
diesel-engine capacity of about 150,000, while
Ford Motors is growing capacity from 250,000
units to 330,000 units a year by mid-2013

Impact on Automobile
Industry

Volatility may cause delay in new investments and

also Ramping up diesel capacity will also require large
capital expenditure. Thus, financial crunch may occur.

Higher discounts thus lower profit margin:

Today manufacturers like Maruti Suzuki, Tata Motors
and Hyundai are offering huge discounts up to Rs.
50,000/- on their petrol powered cars. So this makes
business less profitable and hence difficult to
manage. This hampers manufacturers opinion and
certainty about biggest automobile markets.

A light of Hope
New technologies (like GDI engine) may get priority: Recently
we heard about Delphi developing Gasoline Direct Injection
engine technology. This technology combines advantages of
diesel with that of petrol. If this comes to reality then its a
win-win situation for the automobile industry.

Alternative fuels will emerge: future may show us many cars

coming out running on alternate fuels like these gases, high
ethanol petrol, electricity, hybrid or even hydrogen.
Possibilities are many but situation should force the
manufacturers to think in that direction. After all fuel
reservoir is going to deplete anytime in the next 20-30 years.

THANK YOU