Petrol Price Hike Effect on Business

http//www. youtube. com/watch? v=AEjXDCNww9c&feature=related Operating marginsRamping up diesel engine engine engine motor engine motor motor motor motor capacity leave behind as well require large capital uptake. This impart mean a large capital expenditure outlay, putting impel on operating margins in the short-term. Given the tight liquidity and high provoke rates in the domestic market, and a falling rupee, borrowing costs go out overly seeming be high whether it is in domestic or foreign currency. Unit gross revenueMost Indian automakers rely heavily on natural gas driven fomites. This is particularly true of two-wheeler makers, whose entire portfolio is based on gasolene railway locomotives.The new price hobo could deter buyers from selecting for gas railway political machines and two-wheelers. This go out directly impact revenues and benefit for automakers that wee-wee a gas pedal-heavy portfolio. Segment extendThe accelerator pedal segment has already retreated by 14 per penny in fiscal 2012, while diesel gondola gross gross cut-rate sales cast off grown 37 per cent. With the gasoline price heave, the growth in the diesel segment is only expected to grow. Even a hiking in diesel prices, which some experts are labeling is in all likelihood as early as Friday, will still keep diesel cheaper than gas.Too steep a swinger in diesel will push up swelling, which the g e reallywherenment is keen to avoid. Small car fillThis is the only bright eyepatch for automakers. In a situation where gasolene prices are in the vicinity of Rs 80, acquire for small cars will likely increase, since supply typically accounts for approximately 50 per cent of running costs. Apart from s tread and environmental concerns, especially in urban centres, small cars are highly fuel efficient, which appeals to the highly value- and budge-conscious Indian buyer.Small cars with diesel engines will be in even higher demand. They continue t o be a worried fate and their fears are not unfounded, for gun getting out of reach for many battalion means at that place will be much diesel vehicles on the road in the stratums to come. This will have an adverse impact on the environment as diesel engine emissions are everyplace three times more toxic than petrol. This has been collated by Centre for Science and Environments analysis of the 2010-11 car sales data, which revealed that the demand for diesel-run SUVs has deceased up.Also, 85% of petrol cars sold during the period had engine sizes smaller than 1200 cc. We are extremely implicated about the gigantic petrol price rising. speckle fuel price reforms can help, in this sheath there is partial reform which is dangerous. There is already a dieselization of the car segment. WHO and many other semi everyday health organizations have already that diesel emissions are carcinogenic. There is a really high public health risk, tell executive director, research and p olicy, CSE, Anumita Roychowdhury. People are buying big diesel cars, of engine size above 1500cc. They are not feeling the pinch because diesel is cheap. The subsidy on diesel is absolutely unacceptable, she added. As of now 13 cities in the country comply with Bharat stage IV norms andthe backup manfollow Bharat stage III norms. The pollutants that are of major concern are particulate matter matter and nitric oxide (NO2). Diesel cars are legally allowed to emit these pollutants more than petrol. In fact the legal limit NO2 for diesel cars is three times higher than for petrol cars, explained Anumita.But the fact that diesel is more fuel efficient and gives best mileage masks the down side of increase in diesel cars. Professor L M dassie of the Centre for Energy Studies, IIT Delhi says Diesel contains more energy than petrol and the vehicles engine combustion process is more efficient, adding up to higher fuel efficiency and lowerCO2 emissionswhen using diesel. But the pollutant s emitted from diesel and petrol are characteristically different. While petrol emits more carbon monoxide (CO) and hydrocarbons, diesel emits more smoke and particulate matter that have worse health impacts. Diesel is excessively more fuel efficient adult out a mileage that is nearly 50% more than petrol. Dealers also agree that the demand for diesel cars has soared. The demand for diesel cars in every segment has gone up. While demand for diesel cars has gone up by 15%, petrol car demand has dropped by 20%. Even people who are buying cars worth Rs 50 to Rs 60 lakh are opting for diesel cars. Todsay we got many calls enquiring about diesel cars. Only people who want to buy small cars are opting for petrol cars, express Ravinder, owner of Motosyics in Karol Bagh.Another car dealer, Sanjeev Nath Bhel owner of Rajnath automobiles in Vasant Kunj said that he has started getting calls almost every foster enquiring about models of diesel cars. There is a huge surge in the demand for diesel cars. Its also because diesel gives better mileage. People are mostly opting for middle segment diesel cars , he said. The electro ostracise sentiment is echoed by auto industry officials who feel the rollback notwithstanding the current high petrol prices will have a serious impact on the auto industry and petrol car sales. Around 75 per cent ofMaruti Suzukisales come from petrol cars, said mayank Pareek, Head- merchandising, Maruti Suzuki. Last year, due to petrol price increase, there was a drop of 15 per cent in the sale of our petrol cars. At the same time, diesel sales for the industry are growing. While diesel capacity is being over utilised, petrol car capacity remains under utilised, he added. While companies likeHyundai and Tata are whirl discounts and special schemeson its petrol models to stimulate demand, Maruti plans to make up for the descend in petrol car sales by increasing its diesel volumes. Last year, we sold around 2. 43 lakh units of diesel cars. Thi s year will sell 4 lakh diesel cars, said Pareek. However, even that plan stands in jeopardy with the Finance ministry mulling an increase in the excise duty on diesel vehicles. According to figures compiled by the politics, passenger cars and SUVs account for 15 per cent of diesel consumption a claim that has been rejected by Society of Indian Automobile Manufacturers (SIAM). The industry body says that personal cars make up for only 1 per cent of the contribute diesel consumption in the country while SUVs and taxis account for 5 per cent.Currently, diesel cars take in excise duty ranging from 12 per cent to 27 per cent based on their size and engine capacity. With diesel cars already commanding a higher price than petrol models (which in overthrow amounts to higher revenues for the state), a ascending in duty will only end up decrease demand for passengers cars overall. Read moreDuty on diesel cars may go up The disallow sentiment is echoed by auto industry officials who f eel the rollback notwithstanding the current high petrol prices will have a serious impact on the auto industry and petrol car sales. Around 75 per cent ofMaruti Suzukisales come from petrol cars, said Mayank Pareek, Head-Marketing, Maruti Suzuki. Last year, due to petrol price increase, there was a drop of 15 per cent in the sale of our petrol cars. At the same time, diesel sales for the industry are growing. While diesel capacity is being over utilised, petrol car capacity remains under utilised, he added. While companies likeHyundai and Tata are crack discounts and special schemeson its petrol models to stimulate demand, Maruti plans to make up for the decline in petrol car sales by increasing its diesel volumes. Last year, we sold around 2. 43 lakh units of diesel cars. This year will sell 4 lakh diesel cars, said Pareek. However, even that plan stands in jeopardy with the Finance ministry mulling an increase in the excise duty on diesel vehicles. According to figures compiled by the government, passenger cars and SUVs account for 15 per cent of diesel consumption a claim that has been rejected by Society of Indian Automobile Manufacturers (SIAM). The industry body says that personal cars make up for only 1 per cent of the total diesel consumption in the country hile SUVs and taxis account for 5 per cent. Currently, diesel cars attract excise duty ranging from 12 per cent to 27 per cent based on their size and engine capacity. With diesel cars already commanding a higher price than petrol models (which in turn amounts to higher revenues for the state), a hike in duty will only end up reducing demand for passengers cars overall. Read moreDuty on diesel cars may go up In the short-term, sales will be tho impacted while in the long term a negative consumer sentiment will be created which can hurt the growth of the industry, he added.Expressing similar sentiments, everyday Motors India unrighteousness President P Balendran said previous, the industry was expecting a growth of 8-10 per cent this fiscal but I will not be surp initiationd if we are in the negative territory due to fuel price hike and high interest rates as the market continues to be sluggish. This will exit in inventory pile up ofpetrolvehicles as more and more consumers will opt for diesel vehicles, he added.Describing the latest price hike as a disaster,Maruti SuzukiIndia Managing Executive Officer, Marketing and Sales Mayank Pareek said This will further increase the skew surrounded by 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. Last year, the petrol segment declined by 16. 2 per cent as the demand shifted to diesel vehicles. Now there will be more demand for diesel cars after the price hike but most of the manufacturers are running on full capacity for diesel vehicles, he added.Pareek said the overall impact of the price hike would further dent growth of the automobile industry. Hyundai MotorIndia Ltd coach Marketing and Sales Arvind Saxena said Demand is already under pressure on account of inflation and high interest rates. A hike of much(prenominal) magnitude is neither good for the customer nor for industry. rider 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 post- reckon price hikes and high interest rates, affect the entry-level segment most.As perSIAMfigures, domestic passenger car sales stood at 1, 68,351 units in April 2012 compared to 1,62,813 units in the same month endure year. In the fiscal 2011-12, car sales in India grew by just 2. 19 per cent which was the slowest since 2008-09. The order has already asked the R& D department to speed up the work, and if required, it may also go for a trio party arrangement, the source said. In the last one year, the price of petrol has gone up considerably fuelling the demand for diesel ca rs, which account for more than 60 per cent sales at present.Honda has no diesel variant in its stable, which is becoming a big disadvantage for the company. Honda vivification will become the first car to have the diesel engine followed by City and Jazz. With thehuge surge in the price of petrol, there is a massive demand for the diesel model. We are already giving discount on our cars but it is not possible beyond a point, a selling official from Honda said. Honda is not the only company to advance launch of diesel cars . Renault has also advanced the uncover of its diesel model. Even Volkswagen is looking for models that run on other fuels like CNG.Others are trying to sweeten the deal with various discounts and offers. Sale of diesel vehicles in the country jumped by 35 per cent last fiscal while that of petrol variants dropped by 15 per cent. The sale of petrol cars will see further decline with the latest hike of 7. 50 per litre. A day after the increase, Hyundai announced a petrol price lock assurance programme that will insulate its customers from the new fuel price rise for the next seven months. The programme covers people who will buy petrol models of Eon, Santro, i10, i20, Accent and Verna till May 31. The hike of this magnitude is neither good for the industry nor customers, Arvind Saxena, director, merchandising and sales, Hyundai Motor India, said. Other automobile manufacturers have already started giving discounts and freebies on petrol models and could introduce more such offers following the hike of petrol . According to automobile body Society of Indian Automobile Manufacturers (SIAM), there is a need for the government to reconsider its proposal for such a steep increase in the price of petrol. There is a need to seriously consider the option of a moderate increase in the price of diesel before it impacts the growth of the industry, SIAM said. In a statement, Siam said that there is a requirement to look at the petroleum product pricin g policy in a comprehensive manner and remove distortions so that downstream products market do not get disturbed. The need of the hour is to bite the bullet by reducing the price hike on petrol and revising the price of diesel, which will bring in more revenue for the government as well as some level of parity between the two competing fuels for the industry, SIAM said.However, manufacturers lament that they are not in a position to absorb the currency changes and climb import bill, and have no other option but to pass on the impact to the customers. WhileToyota Kirloskar MotorsandGeneral Motors Indiaare expected to announce price hikes soon, others such as MarutiSuzukiIndia andHyundai Motorare likely to follow suit. We have been facing cost pressures over the last few months and have distinguishable to hike the prices. The quantum is yet to be finalised, but the hike should come into prepare from June, said Toyota Kirloskar Motors deputy MD (marketing) Sandeep Singh.General Mot ors has decided to increase prices from June 1, but is temporarily revisiting decision in the light of massive increase in petrol prices. We are re-considering plans to increase prices from June as customers are hit by the massive increase in the prices of petrol. We do not want to create a double whammy for customers and are planning to postpone the hike till the conditions improve in the domestic market, says General Motors vice-president (corporate affairs) P Balendran. Car companies had increase prices by up to 1. 5% to 3 in January this year, but the real impact came after 2%-5% increase in excise in the Union Budget. While most cars, including small hatchbacks, became expensive by Rs 6,000, the hike was up to Rs 5 lakh for top-end luxury segment. This resulted in overall sales falling to 168,351 units in April. Carmakers remain unbelieving on market prospects with customers postponing new purchases. Countrys largest carmaker, Maruti Suzuki, is too weighing its options. There are intense cost pressures with compute to import of important commodities like steel due to currency and other reasons, said a ripened Maruti executive.An analyst tracking the sector says another hike will badly hit the auto market, which is already crawling. The market is already reeling under the price of petrol price hike, which has further dampened the sentiment after the Budget hike. Now another hike will hit the industry hard, said a Mumbai-based analyst with a Brokerage firm. High petrol prices and weak consumer sentiment in the face of slowing economic growth dragged auto sales down in May. Car market leader Maruti Suzuki India Ltd led the decline with a 4. 3% drop in domestic sales to 89,478 units from a year earlier.Sales of Marutis petrol models such as WagonR, Alto and the 800, which make up a third of overall sales at the Indian subsidiary of Suzuki Motor Corp. , shrank by 29%. Indias economy grew 5. 3% in January-March, the slowest pace in nine years, data released on Thursday showed. Slowing growth has dampened consumer sentiment high petrol prices and interest rates have deterred car buyers, who are increasingly preferring diesel models. Analysts say car sales will take a further hit in the months ahead after oil marketing companies increased the price of petrol by as much asRs. 7. 50 per litre on 23 May.The steep increase in fuel cost, combined with a recent increase in vehicle prices (due to rising input costs and an excise duty increase), has resulted in a 6% increase in the total cost of ownership of petrol cars over the past four-to-five months, wrote Joseph George, an analyst at IIFL institutional Equities. We cut our volume growth estimate for the car industry (excluding utility vehicles) from 16% to 12%. We also expect demand to further shift from petrol to diesel vehicles. Sales at Hyundai Motor India Ltd, the blink of an eye largest car maker by unit sales, rose 3% to 32,010 units in May compared with a year ago.Arvind Saxena, di rector of marketing and sales at Hyundai Motor India, said The recent hike in petrol prices has depressed market sentiment, with the macroeconomic indicators providing no cause for cheer. The demand outlook doesnt look very bright. Meanwhile, driven by sales of the Nano small car, passenger vehicle sales at Tata Motors Ltd rose 6% to 20,503 units compared to May 2011. The fuel efficient car billed as the worlds cheapest, contributed 41% of Tata Motors total sales in May. Nano sales rose 31% to 8,507 units.Utility vehicle market leader Mahindra and Mahindra Ltd kept up its voiceless sales momentum, posting an increase of 27% to 21,154 units in the month from a year ago. The companys portfolio of models is predominantly diesel-fuelled, shielding it from the effect of the hike in petrol prices. Sales at General Motors India Pvt. Ltd and Ford India Pvt. Ltd dropped 27% and 14%, respectively, to 6,079 and 6,036 units. At Toyota Kirloskar Motor Pvt. Ltd, sales doubled to 15,051 units, b uoyed by the companys Innova and Fortuner models and partly because of a relatively low base last year. To stave off the impact of the enfeebling rupee, Toyota has undertaken a 1% increase in the prices of Etios diesel and Innova and a 0. 5% increase in Fortuner and Etios Liva, diesel, with effect from 1 June. said Sandeep Singh, deputy managing director-marketing. Albeit on a low base, sales at Nissan Motor India Pvt. Ltd, too, increased 98% to 3,138 units in May. Meanwhile, notwithstanding the sluggish sales in the overall two-wheeler market, Hero MotoCorp Ltd continued its strong sales trajectory, despatching 556,644 motorcycles and scootersan expansion of 11. 3% over the corresponding month last year. TVS Motor Co. eported a decline of 4. 3% to 176,012 units while Suzuki Motorcycle India Pvt. Ltd, on a small base of 36,746 units, saw an increase of 21% compared to a year ago. Bajaj Auto Ltd will report its sales figures next week. The 10-company auto index onBSE Ltdhas dropped 18. 46% in the last one month, compared to a 7. 82% drop in the benchmark Sensex. Car firms are looking at raising theprices of their diesel variantsas rupee depreciation has led to a hike in imported input costs and they have to make up for the discounts being offered on their petrol variants, which are not selling due to high fuels costs.While Toyota has announced that it willhike the prices of its diesel modelsfrom one to two per cent from June 1, other companies are expected to follow suit. This will be the third price hike since January this year. Diesel cars to drive industry growth Ford There is tremendous pressure on auto companies and a price hike is certain. The one-two per cent hike will be stiff from June. However, we have not decided the exact amount by which prices will be raised across models, Sandeep Singh, deputy managing director (marketing), Toyota Kirloskar Motors, said. There are rising input costs and then the depreciating rupee also adds to import bills fo r parts being sourced from abroad. Auto firms cant absorb cost beyond a point, Singh explained. However, Singh has hinted that the hike will be more on the diesel variants than the petrol models. Prices of petrol models which are still selling well may also be increased. Others such as General Motors, Maruti Suzuki, Hyundai Motors had also hinted at hike in car prices from June onwards.Most car companies are loading their petrol variants with freebies and offering discounts ranging from Rs 3,000-Rs 50,000 depending on the demand for the model. Earlier in January, car manufacturers increased prices to the tune of 1. 5 to three per cent. It was followed by a second hike of two to five per cent to compensate for the excise duty hike proposed in the Budget. However car dealers are worried. Another round of price hike is not going to help the sector in any way. Petrol car sales are at an all-time low and only diesel models are bringing in revenue.Any further price hike will dent the pros pect of sale of diesel vehicles as well, a General Motors showroom owner in south Delhi said. Even experts say that a price hike will further dampen the sentiment and sales prospects of the auto companies. The evidentiary hike in petrol price has already dampened the sentiment and increasing prices of vehicles will hit demand, said Yaresh Kothari, auto analyst, Angel Broking. The hike in petrol rate and the proposed increase in diesel vehicles will make it difficult for the industry to achieve their sales growth target of 10-12