Petrol Price Hike Effect on Business

Topics: Automotive industry, Suzuki, Volkswagen Group Pages: 10 (3664 words) Published: November 19, 2012 Operating margins: Ramping up diesel capacity will also require large capital expenditure. This will mean a large capital expenditure outlay, putting pressure on operating margins in the short-term. Given the tight liquidity and high interest rates in the domestic market, and a falling rupee, borrowing costs will also likely be higher whether it is in domestic or foreign currency.

Unit sales: Most Indian automakers rely heavily on petrol driven vehicles. This is particularly true of two-wheeler makers, whose entire portfolio is based on petrol engines. The new price hike could deter buyers from opting for petrol cars and two-wheelers. This will directly impact revenues and profits for automakers that have a petrol-heavy portfolio.

Segment growth: The petrol segment has already retreated by 14 per cent in fiscal 2012, while diesel car sales have grown 37 per cent. With the petrol price hike, the growth in the diesel segment is only expected to grow. Even a hike in diesel prices, which some experts are saying is likely as early as Friday, will still keep diesel cheaper than petrol. Too steep a hike in diesel will push up inflation, which the government is keen to avoid.

Small car demand: This is the only bright spot for automakers. In a situation where petrol prices are in the vicinity of Rs 80, demand for small cars will likely increase, since fuel typically accounts for about 50 per cent of running costs. Apart from space and environmental concerns, especially in urban centres, small cars are highly fuel efficient, which appeals to the highly value-  and budge-conscious Indian buyer. Small cars with diesel engines will be in even higher demand.

They continue to be a worried bunch and their fears are not unfounded, for petrol getting out of reach for many people means there will be more diesel vehicles on the road in the years to come. 

This will have an adverse impact on the environment as diesel engine emissions are over three times more toxic than petrol. 

This has been collated by Centre for Science and Environment's analysis of the 2010-11 car sales data, which revealed that the demand for diesel-run SUVs has gone up. Also, 85% of petrol cars sold during the period had engine sizes smaller than 1200 cc. 

"We are extremely concerned about the huge petrol price hike. While fuel price reforms can help, in this case there is partial reform which is dangerous. There is already a dieselization of the car segment. 

"WHO and many other public health organizations have already that diesel emissions are carcinogenic. There is a really high public health risk," said executive director, research and policy, CSE, Anumita Roychowdhury. 

"People are buying big diesel cars, of engine size above 1500cc. They are not feeling the pinch because diesel is cheap. The subsidy on diesel is absolutely unacceptable," she added. 

As of now 13 cities in the country comply with Bharat stage IV norms and the rest follow Bharat stage III norms. 

"The pollutants that are of major concern are particulate matter and nitrous oxide (NO2). Diesel cars are legally allowed to emit these pollutants more than petrol. In fact the legal limit NO2 for diesel cars is three times higher than for petrol cars," explained Anumita. 

But the fact that diesel is more fuel efficient and gives better mileage masks the down side of increase in diesel cars. 

Professor L M Das of the Centre for Energy Studies, IIT Delhi says "Diesel contains more energy than petrol and the vehicle's engine combustion process is more efficient, adding up to higher fuel efficiency and lower CO2 emissions when using diesel. 

But the pollutants emitted from diesel and petrol are characteristically different. While petrol emits more carbon monoxide (CO) and hydrocarbons, diesel emits more smoke and particulate matter that have worse health impacts." 

Diesel is also more fuel efficient giving...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Petrol Price Hike Essay
  • to study the petrol price hike Essay
  • Petrol Price Hike Essay
  • Price Hike Essay
  • Price Hike Research Paper
  • Price Hike Effects in Bangladesh Essay
  • Essay about price effect
  • Essay on Price Effect:

Become a StudyMode Member

Sign Up - It's Free