Revati Kasture Head - Industry Research; Vishal Srivastav - Analyst; and Kunal Maheshwari – Analyst
CARE Research
The growth momentum of FY10 was continued in the FY11 as industry posted a strong rise of 29.2 per cent on y-o-y basis. Sustained economic buoyancy and healthy liquidity scenario drove this growth. PV manufacturers also responded positively with a slew of new model launches. Industry witnessed new entrants like Volkswagen and Nissan in the voluminous yet highly competitive compact car segment launching models suiting Indian conditions. However, recent increase in fuel prices especially petrol combined with rising inflation may dent consumer confidence to some extent in near future.
Rising fuel prices tapering off consumer confidence...
Deregulation of petrol prices from second quarter of FY11, has given autonomy to oil companies for setting petrol prices in tandem with global crude oil prices. During the last 6 months, there have been 6 occasions of revision in petrol prices, which has led to around 16 per cent rise in petrol prices during this period. Hence, the worries for petrol vehicle owner have intensified. Whereas, there has been just a 4.5 per cent rise in diesel prices during the same period, as the diesel prices have not yet been de-regulated by the government.
Comparison between Diesel and Petrol prices (Base: January 2010)
Month
Petrol
Diesel
Petrol
price
Diesel
price
Jan - 10
Feb - 10
Mar - 10
Apr - 10
May - 10
Jun - 10
Jul - 10
Aug - 10
Sep - 10
Oct - 10
Nov - 10
Dec - 10
Jan - 11
Feb - 11
Mar - 11
Apr - 11
May - 11
CARE Research studied that the average fuel cost per km for diesel driven vehicles came to around Rs 1.7 per km as compared to petrol driven vehicles, which was Rs 3.5 per km during January 2010. This is mainly because the retail price of petrol is higher than diesel and the mileage of petrol driven vehicles is comparatively lower than diesel driven vehicles. However, owing to market driven price of petrol, the fuel cost for petrol driven vehicles currently has spiked to Rs. 5.70 per km, whereas the cost for diesel driven vehicles has increased marginally to Rs. 2.30 per km.
Cost benefit analysis: Diesel and petrol vehicles
Diesel vehicles
Petrol vehicles
Fuel Cost (Rs./litre)
42.06
68.30
Mileage (Km/Litre)
18
12
Cost Per Km
2.30
5.70
Cost comparison pre & post deregulation
Notes:
Petrol and diesel prices are for Mumbai
The mileage is compared between models with similar specifications
Diesel vehicle becomes more economical when driven more than 30 kms per day
Though the prices of diesel driven vehicles are almost 15-20 per cent higher than the comparable petrol driven option, higher fuel efficiency owing to latest technology advancements in engine combined with lower fuel price provides a trade-off for diesel driven vehicles. CARE Research studied that when travelling distance is more than 30 kms per day, operating diesel driven vehicle becomes more economical than petrol driven vehicle even after factoring in the higher EMI outflow. Therefore, if a person has a daily running of 50 km, an approximate saving in diesel vehicles would be Rs. 60 daily.
Table: Cost comparison between diesel and petrol cars
Diesel vehicles to drive passenger vehicle industry
Going forward, CARE Research expects the share of diesel driven vehicles to increase in the overall pie of Indian PV industry. With nearly 90 per cent of new sales in utility vehicle segment are of diesel variants, the dieselisation trend is now catching up strongly in passenger car segment also. Further, rising difference between petrol and diesel retail prices is encouraging more and more buyers to opt for diesel vehicles. Furthermore, as diesel is a primary fuel used in transportation sector and upward revision in diesel prices pushes inflation northwards, complete de-regulation in diesel prices is unlikely in short-term. CARE Research estimates diesel vehicles to account for around 1/3rd of new sales in PV segment in the next two years, from the current level of around 28 per cent.
