Effect Of Petrol Hike On Auto Sector

by khalid on 17/09/2011 · 1 comment

Thursday saw yet another unlucky day for petrol vehicle owners – petrol prices went up again. This Rs 3 increase in the prices is going to hurt the auto sector very badly, as is obvious. Because there are more options available now, diesel and CNG, the customers will refrain from buying petrol cars and two-wheelers for their apparent high cost of usage. Manufacturers of two-wheelers are worried about their sales because of the hike; where it was witnessing a two-digit growth before, the sales are sure to go down with this recent hike.

 It said that the monthly price of petrol today is exceeding the EMI of the two-wheeler. Let’s say a rider has a bike that gives 70 km per liter mileage and takes petrol around Rs.100 everyday which amounts up to Rs.3000 for a month. So, if his bike was available at Rs.50,000 with 12% auto loan for a year then his EMI would be around 3,600 which is just as much as the running cost of the bike is. Additionally, it has also widened the petrol-diesel gap further by Rs.25 per liter. So, a 5 lakh petrol car with Rs.50,000 down-payment will have EMI around Rs.17000 per month for 3 years and the running cost will come out to be 21,000 per month while in a diesel car it will be Rs.13,800 which helps the owner to save Rs.7500 per month.

Bell the Bull says: Last time when petrol prices went up, the sales of Wagon R and Maruti Alto dropped 3%. It is much worse for companies like Wagon R which are not Diesel variant. The increasing fuel prices is forcing people to look at other alternatives and if it continues so, the auto industry will see some major disruptions.

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Tata Motors updates September 18, 2011

In what way is this article speaking about stock “Tata Motors”.


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