Diesel car sales to remain strong in India, unfazed by rise in petrol prices

author image CarTrade Editorial Team
Monday 22 April 2013, 12:19 PM

Despite a reduction in the gap between petrol and diesel prices in India, auto industry experts feel that buyers would still tend to lean more towards diesel vehicles rather than petrol ones. Though the Government has made many attempts to correct the diesel prices, the advantages gained by this fuel over petrol have become quite high in this aspect. From a share of 32 per cent of the Indian automobile market just two years ago, diesel vehicles now command a whopping 58 per cent of the same. This is due to the fact that petrol was taxed heavily and did not enjoy government offered subsidies like diesel. Though the premium over petrol had gone up to 77 per cent (Rs. 32 per litre), it is now down to 36 per cent (Rs. 17.50 per litre).

With an aim to keep inflation under control, marginal increases on diesel prices were incorporated, so that prices of diesel used in public transport buses and trucks could be controlled. As a subsidy burden was experienced, it was decided to increase the prices of diesel by 50 paisa every month since August 2012. As compared to this, the prices of petrol has constantly been increased over the last few years, in conjunction with international crude prices.

Looking at the availability of diesel as a fuel in India, auto companies have also changed their selling strategy and focussed more on the development of technology for diesel vehicles. Top manufacturers such as Maruti Suzuki, Hyundai Motor India and Ford are investing in the manufacture of different diesel engines for the country. In fact, on April 11, even Honda Cars India officially launched their first diesel car in India, called as the Amaze. In about 2 years, diesel vehicle will experience a rise in demand by almost 60 per cent.

Speaking on the gap between the two fuels, Indian Oil Corporation (IOC) Executive Director N. Srikumar said, “We have not collated the bookings, but going by the footfalls in our showrooms and initial bookings, April should be a terrific month for us.” He also added “Internationally, diesel is costlier than petrol. But in India it is the other way round because of higher taxes on petrol.”

As per data in the oil industry, consumption of diesel has been the lowest, which happened due to slowdown of the Indian economy. Within the past 1.5 months, petrol prices have plummeted down by Rs 4.65 a litre, so the gap between fuels now stands at Rs 17.50 per litre, instead of Rs 22.50 a litre in the same period last year. However, it would be nice to see if the price of upcoming vehicles can also be lowered, with diesel prices back to their normal state.

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