labels: Oil & gas
Small car makers see fuel price hike as an opportunity within a challenge news
05 June 2008

New Delhi: Makers of small, fuel-efficient cars such as Maruti and Hyundai could see the revised price of petrol as an opportunity within a challenge. Though it renders the fuel their cars run on more expensive, it also provides them with an opportunity to position and market their more fuel-efficient compact cars to a wider, more price sensitive customer base.

The price of gasoline remains rather irrelevant to buyers of luxury cars. Sources in the auto industry say that typically fuel price hikes are followed by a temporary dip in the market during the short term, which eventually peters our as people shift to more fuel efficient cars.

This segment represents one of the largest chunks of the car buying population in a country like India, where over 70 per cent of cars are actually, compacts. However, in recent times, auto companies have just about concluded a price revision exercise on account of higher input costs and hardening interest rates.

The fuel price hike at such a time promises a double whammy in the short term, slowing down the sales numbers for the industry. However, it will also reshapre the industry in favour of compact and fuel efficient cars, which use alternative fuels such as auto LPG and CNG, which are priced lower than conventional petrol and diesel.

The price hike may also re-segment the market when it comes to the B and C segment cars, falling in the premium category, as buyers from here would be most likely to shift to more fuel efficient compacts. In two wheelers too, there could be a perceptible shift in the market towards more fuel efficient 100cc motorcycles as opposed to more powerful fuel guzzlers.

One community set to benefit from the price hike are the retrofitters of LPG and CNG kits, who are sure to leverage the price differential to market their wares more aggressively.

''With prices of petrol rising by Rs5 per litre, the percentage difference between the running cost of a vehicle on petrol and on auto LPG jumps significantly,'' said a Mumbai based retrofitter.

''People suddenly realise that by switching fuels, they will be able to maintain their current lifestyles and mobility, without impacting their wallets''. Mumbai-based retrofitter of LPG kits Suraj Auto LPG told domain-b that serious inquiries have jumped three fold in the last two days, and expect a higher rate of conversions in the days ahead.


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Small car makers see fuel price hike as an opportunity within a challenge