Petrol prices set to boost diesel car sales

NEW Delhi, January 19 (TNN): Environment minister Jairam Ramesh may not like this, but the growing gap between the pricing of petrol and diesel is likely to give a boost to diesel-powered vehicles as more and more people prefer to cash in on the lower price of the fuel that also fetches more mileage.
The gap, now as high as Rs 20, will add to the already-rapid growth of diesel-powered vehicles just as companies are also expected to bring out more vehicles with diesel option. Officials from top car companies like Maruti, Hyundai and Toyota feel that the shift would happen faster if the wide gap continues.
"If this substantial price differential continues for long, more and more people will prefer to go for diesel," said Shashank Srivastava, chief general manager (marketing) at Maruti Suzuki. "The refinement in diesel technology and the higher fuel efficiency the engines give are other reasons for their growing popularity."
The share of diesel cars in overall car sales is around 28% currently, and the figure has been climbing up steadily. Srivastava said that diesel used to be about 23% of the overall car market in 2005-06 and the price advantage the fuel offers has been driving demand. Sales of diesel vehicles have experienced a CAGR of 22% between 2005-06 and 2008-09, while for petrol it was 12%, clearly highlighting the shift in preference. Also, while diesel vehicles are priced around a lakh (rupees) higher than comparable petrol model, their higher fuel efficiency means lower running cost-Rs 1.90 per km for diesel to petrol engine's Rs 4 per km. "With this benefit, the higher price of the diesel vehicle can be recovered in about 3-4 years, if the vehicle runs about 37000-38000 kms," Srivastava said. For Maruti, diesel is a big number churner. The share of diesel in the Swift hatchback and Dzire sedan is as high as 67%, while in the Ritz compact, it accounts for about 47%.
Arvind Saxena, director (sales and marketing) at Hyundai India, agreed that the growing gap would benefit diesel-powered vehicles. "It is a big motivation to move towards diesel vehicles as their viability gets better. If diesel prices are not de-regulated as is happening in petrol, the incentive will always be there and diesel will be increasingly preferred," he said.