Debate on car course

New Delhi, Jan. 17: Car makers are going full throttle with their plans for diesel models and engines even as the government today proposed recurring diesel price rises to bottle the country's burgeoning fiscal deficit.

Analysts, however, believe that industry optimism may prove beneficial only in the short term ' as long as the gap between petrol and diesel prices persist.

Gradually, the price differences between the fuels should get bridged, which will give petrol cars an edge over diesel models, the analysts argued.

At present, diesel models contribute around 60 per cent to total sales.

Maruti Suzuki is bullish on diesel. "There will not be an immediate impact on the sale of our diesel cars and capacity expansion plans," chairman R.C. Bhargava said.

He said Maruti had a waiting list for diesel models, and the company's ability to sell was constrained by its manufacturing capacity and not by the government's subsidy.

Maruti derives its optimism from some analysts who expect the price differential to exist for at least two years.

The company plans to manufacture 150,000 diesel engines at its Gurgaon facility by the end of September, which will be doubled to 300,000 by the following year.

Industry players said the removal of price difference between the two fuels would lead to a pick-up in overall demand.

"The market distortion towards diesel vehicles was because of the price differential. Now customers will be able to choose a vehicle based on their motoring needs instead of a fuel subsidy," said Jnaneswar Sen, senior vice-president (marketing), Honda Siel Cars India.

Honda, which will introduce its first diesel model Amaze in the first half of this year, will not do a rethink on its line-up either. "We already have a very strong petrol line-up and with the addition of diesel models, we will be ready to offer a complete spectrum of cars to the buyer," Sen said.

The industry has been lobbying for the reduction in the fuel price difference calling it "unsustainable". Almost all SUVs and jeeps are diesel-driven along with many premium cars sold by Audi and BMW. It has, however, opposed proposals to hike excise duty on diesel cars or raise road taxes on the ground that it will lead to a further slump in the market, which has been posting slow or negative growth last year.

Last fiscal, car sales grew just 2.19 per cent. Companies expect sales to grow between 1 per cent and 4 per cent this year.

"Mahindra has always been supportive of narrowing the gap between diesel and petrol prices. An increase in diesel price will have very little impact on the sales of utility vehicles but may slightly shift the demand to petrol in the passenger car segment in the small and mid-range," said Pawan Goenka, president (automotive and farm equipment), MandM Ltd.

He cautioned that an increase of beyond Rs 5 in the diesel price might start impacting industry volume.

"Immediately there may be an impact on buyer sentiment and overall demand for cars may moderate. In the long term, diesel vehicles may account for only 30 per cent of total sales like it was three years ago," said Abdul Majeed, analyst at consultancy firm PwC.

Matches

MORE TOP STORIES TODAY

Bangalore's arsenal blazes to victory

Bangalore's arsenal blazes to victory

Yuvraj Singh was back to his best in his first match for Royal Challengers Bangalore. More »

Time for Chennai to enter familiar cocoon

Time for Chennai to enter familiar cocoon

Chennai have been able to purchase batting replacements for the loss of Michael Hussey and spin reinforcements in the form of Samuel Badree. They appear… More »

Evenly matched Rajasthan and Hyderabad face-off

Evenly matched Rajasthan and Hyderabad face-off

A quality that defines Rajasthan and Hyderabad is consistency. Rajasthan was one among two teams to enjoy complete dominance at home last season. Hyderabad… More »

BCCI to meet before next court hearing

BCCI to meet before next court hearing

The BCCI will hold an emergent working committee meeting on April 20 to discuss the future course of action with regard to the Supreme Court hearing concerning… More »

Kallis, Narine star in Knight Riders’ crushing win

Kallis, Narine star in Knight Riders’ crushing win

An all-round display saw Knight Riders thump Mumbai Indians by 41 runs in the IPL-7 opener. More »

Gavaskar wants a clean IPL

Gavaskar wants a clean IPL

"Integrity is non-negotiable..." says the BCCI's interim chief ahead of Season 7 of the tainted league. More »

'Yak' Kallis still on top of his game

'Yak' Kallis still on top of his game

The 38-year-old South African veteran turned it on for Kolkata Knight RIders in the opening match of IPL-7. More »

Srinivasan named in fixing report: SC

Srinivasan named in fixing report: SC

The court emphasised that the tainted administrator can no longer work for the BCCI. More »

Yuvraj happy to play for RCB: Kohli

Yuvraj happy to play for RCB: Kohli

New-look RCB will play their first game of IPL-7 on Thursday. More »

Shane Watson issues moral warning

Shane Watson issues moral warning

'Everyone knows what is right and what is wrong and if you do the wrong thing it will be found out' More »

Why I'm not looking forward to the IPL

Why I'm not looking forward to the IPL

Welcome to another season of a league that many watch but few trust. More »

IPL: News Line

IPL: News Line

A round-up of all the news from this season of the IPL. More »

Johnson may quit T20s for Tests

Johnson may quit T20s for Tests

Australia's Mitchell Johnson may quit limited-overs cricket to prolong his test career with an eye on the 2015 Ashes series in England, the fast bowler… More »

Nepal players call off boycott

Nepal players call off boycott

Thaw in relations after formation of an advisory committee that would work in tandem with the Cricket Association of Nepal. More »

There's a lot going on: Fleming

There's a lot going on: Fleming

He experienced anxious moments in the lead-up to the tournament as the courts decided on whether to suspend the franchise, he said, but stressed that the… More »

Latif couldn’t work with tainted players

Latif couldn’t work with tainted players

Former Pakistan cricket captain Rashid Latif said Tuesday he turned down the job of national chief selector because he could not work with ex-players tainted… More »

We are not over-confident: Bailey

We are not over-confident: Bailey

Indian Premier League — George Bailey-led Kings XI Punjab will face Chennai Super Kings on Friday. More »

Big runs expected, with bat and ball

Big runs expected, with bat and ball

Royal Challengers Bangalore: Their main concern, once again, is the fast bowling More »

Taxing issue — BCCI hits roadblock

Taxing issue — BCCI hits roadblock

MoU between BCCI & its units to avoid double taxation delayed after a few decline to share details. More »

Black Caps pick rookie duo for West Indies

Black Caps pick rookie duo for West Indies

New Zealand selectors included two new caps in a 15-man Test squad named Tuesday to tour the West Indies, with injury-hit spinner Dan Vettori's future… More »

The stage is set for IPL-7 to start

The stage is set for IPL-7 to start

The Preview — Defending champions Mumbai Indians take on Kolkata Knight Riders More »

Srinivasan appeals to court to allow BCCI comeback

Srinivasan appeals to court to allow BCCI comeback

He was aggrieved by the allegations against him during the hearing. More »

India: cricket's Brazil

India: cricket's Brazil

They are tough to beat with a big talent base exposed to good facilities. (CYCSPL) More »

Delhi Daredevils say no to gifts

Delhi Daredevils say no to gifts

Franchises are doing their bit to refurbish the image of the tainted league. More »