New Delhi, Sept. 23: Car makers planning to launch sports and multi-utility vehicles in the next few months are likely to face weak demand because of a recent hike in the price of diesel.
Sales of SUVs and MUVs had remained strong in the last five months despite an overall gloom in domestic car sales on account of a huge price difference between petrol and diesel.
Between April and August, utility vehicle sales grew 57.03 per cent to almost 2.08 lakh units. They now constitute a fifth of the overall market, up from 13.52 per cent a year ago.
Encouraged by the demand, automobile majors have lined up a slew of launches in this segment. Mahindra & Mahindra has rolled out its mini SUV Quanto last week, while Nissan’s seven-seater multi-purpose vehicle Evalia will hit the roads later this month.
The Chevrolet Enjoy, SsangYong Rexton and Ford EcoSport will also be unveiled in the next couple of months.
Industry players contend that a hike of Rs 5 per litre in diesel price may impact the buying sentiment, which is already subdued by a high interest rate and a slowing economy.
“The hike will increase freight costs and raise prices of all commodities adding to inflation. This will impact the buying capacity and the intent of consumers, dampening overall demand,” said a senior executive of an automobile firm.
The All India Motor Transport Congress, an organisation of truck operators, has increased freight charges across the country by 15 per cent following the rise in diesel prices.
Car firms expect a revival in the demand for petrol models following the partial reduction in the price gap between petrol and diesel prices.
“In the long term, when the price difference between petrol and diesel fuels reduces, obviously sales of petrol vehicles will increase,” said P. Balendran, vice-president of General Motors India.
Petrol cars are not guzzlers and their upfront cost is also lower than diesel models.
At present, diesel cars account for about 40-47 per cent of new purchases compared with less than 20 per cent a few years.