Stuck in a pothole

The cars market is seeing a shake up with petrol price rise, car makers raising the price and now higher excise duty on diesel cars. There seems to be no alternative left for the car buyers or users than to shell out more money. The pockets of consumers are going to be hit.

Prices riding high

The Indian consumers are being hit from all the areas:

• Price rise of Petrol – The petrol prices were hiked by Rs 7.50 and later dropped by Rs 2. Current price for petrol is Rs 70.24/Ltr.
• Car price rise – With the fall in May sales, companies are planning to raise the car prices which again will hit consumers’ pocket.
• High interest rates
• Soon hike in excise duty of diesel cars – The government is likely to increase excise duty on diesel cars to neutralise the advantage of the state subsidy on a fuel that is Rs 30/litre cheaper than petrol. The decision on this may be taken before the monsoon session of Parliament begins sometime in July.

According to Petroleum Minister S Jaipal Reddy, there was an immediate need to raise fuel prices. Until June 2010, the petrol prices were decontrolled by the government but since 4 November 2011 the prices have been increasing. The rise has been seen, despite oil price rising by 14 per cent and 7 per cent fall in value of rupee against the US dollar.

Due to subisidies the oil companies have been incurring losses and with rupee value falling the losses would rise. “"If rupee depreciates by one against the US dollar, our oil companies lose Rs 8,000 crore (annually)," said Reddy.

Automakers feel the heat

With all these factors, the sales of four wheelers have dropped down in May 2012. With brands including like Maruti Suzuki, Ford, TVS and General Motors India have seen lowered sales. This has led them to plan a hike in the prices of the cars. In fact, Maruti has also has cut production of some petrol models, including Alto, as sales of such cars have declined due to high fuel costs. The company had recently stopped production of petrol models, including the Alto, M800, A-Star, Estilo and Omni for three days to prevent inventories piling up further.

FACT FILE:

Diesel V/S Petrol:

• Car price: Diesel cars are about Rs 80,000 – Rs 1,00,000 costlier than petrol cars
• Fuel price: Rs 40.91/Ltr for diesel and Rs 70.24/Ltr for petrol
• Longevity:
• Diesel cars are a preferred choice for long distance travelers
• Petrol cars give out less pollution as the fuel is more purified
• Diesel cars offer better mileage

Sales going down after price hike

                                                                                              Source: Industry