Auto firms unfazed by oil price hike

Unfazed by the fuel price hike announced by the UPA government yesterday, leading automobile companies today said that though the cost of owning a vehicle has gone up, it is not significant enough to affect demand or even defer buying decision.

A leading player in the industry said that in the last one year, despite frequent hike in the fuel costs, demand for vehicles have been increasing. On an year to date basis (October 2003 to November 2004), price of petrol has gone up by a little over 23 per cent, while demand for automobile, according to industry sources has climbed steadily at 20 per cent.

But some players said that this could temporarily impact entry-level car sales. "This is a very cost-conscious segment and most likely to be impacted by the hike in fuel prices," said an industry source.

However, within the industry, it could cause certain movements. A spokesperson for India's leading car maker, Maruti Udyog Ltd (MUL) said, with rising fuel costs, customers would increasingly look for fuel efficient vehicles. Passenger car models from MUL and Toyota have been ranked highest in six out of the ten vehicle segments, according to the findings of the 2004 four-wheeler total customer satisfaction study conducted by market information provider TNS in October 2004.

RL Ravichandran, vice president (marketing), Bajaj Auto Ltd, said, "It is difficult to assess the impact of this fuel price increase on vehicle sales. But I can say that we make some of the most fuel efficient bikes in the country by introducing the DTSi technology."

Two, with the price diffrential between petrol and diesel higher now, it could make people buy more diesel cars than petrol cars. At present, diesel accounts for about 20 per cent of car sales in the country.

Three, automobile analysts also said that people could look at CNG vehicles anew as operating these vehicles would work out much cheaper than petrol or diesel cars.