The impact will be felt in the long run as the inflation rate, which will climb further in the wake of the decision, is likely to hit the purchasing power of potential buyers. Almost all the segments including cars, commercial vehicles, tractors, and two wheelers will get impacted, say manufacturers.
"Oil marketing companies had been bleeding due to skyrocketing crude oil prices globally. The impact of the hike in petrol will be felt on motorcycle makers like Bajaj Auto," said Rahul Bajaj, chairman, Bajaj Auto.
Also, Ashok Leyland and Tata Motors agreed that the decision will affect the growth of commercial vehicles in the long run.
Tractor sector, which is sensitive to interest rates, will also get impacted, as the running cost will go up.
"Fuel price hike will impact the overall running cost of the vehicle including the freight cost," said Anjani Kumar Chaudhari, president, (farm equipment sector), Mahindra & Mahindra.
Naresh Thakkar, managing director, ICRA, said, "Although oil marketing firms had little option but to pass on the rise to customers, it will surely have an impact on buying of vehicles but only for a short period."
Some automakers believe that the hike will mean increased focus on alternative fuel for vehicles. The demand for LPG or CNG powered vehicles will gradually rise as a result.
Arvind Saxena, senior V-P (marketing and sales), Hyundai Motor India, said, "There may be a sudden shift to alternative fuels like LPG, CNG, or even diesel by customers. The impact will be felt more on fuel guzzling vehicles than on smaller cars, which are more fuel efficient. More manufacturers may launch LPG-driven vehicles as it will naturally attract a large amount of buyers."
However, analysts believe that running costs of a car and other similar premium priced products will not get affected by the hike as buyers of such vehicles belong to the medium to high income group level. Even the two wheeler segment may remain stable in the long run as the fuel efficiency delivered by it are much higher.
Vijay Sarthy, analyst, JM Financial, said, "The hike has got nothing to do with the long run as a person buying a car will still buy a car even if he has to pay that extra amount. Cost of rate of interest has a much higher impact on car buying decision than fuel hikes."
The industry is facing tremendous pressure on the input cost as certain costs of raw materials have nearly doubled in the last three years. There is also the apprehension about the industry slipping into recession owing to high lending rates coupled with reduced availability of finance in many markets.
