Auto industry feels hike won’t affect diesel car sales

RC Bhargava, chairman of Maruti Suzuki, added that the gap between petrol and diesel fuel will take a few years to narrow, but when that happens the share of diesel vehicles in new car sales may come down. "In a couple of years, the share of diesel car sales may come down from 59% to 49-50%, but diesel car demand is here to stay. A hike of 50 paise per month does not do much in terms of changing a buying decision," he said.

Companies like Honda Motor India, Toyota Kirloskar, Hyundai Motor India and Maruti Suzuki may see gains if buyers shift towards petrol cars. Many carmakers are straddled with high levels of unutilised petrol engine production capacity, even as they have increased investments towards setting up local diesel engine plants. Hyundai has announced an investment of around Rs 1,600 crore, part of which is for a diesel engine plant, while market leader Maruti is investing over Rs 2,000 crore in expanding diesel engine output apart from extending its engine supply contract with Fiat.

Vishnu Mathur, director general at the Society of Indian Automobile Manufacturers, said that raising diesel prices is a step in the right direction and in line with the industry body's view that diesel prices need to be deregulated in small doses. "I don't see an immediate change in vehicle demand. As the price difference between diesel and petrol reduces over time, we may see petrol car demand rise and diesel car demand moderate," he said.

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