Diesel vehicle sales likely to be negative in Q4

Sales at Maruti Suzuki increased by 54% and 60% in Dec and Jan, growth rate tapered off to 22% last month

Sale of diesel vehicles, which has been growing at a fast clip over the past year, fell 5 per cent in February, compared to the same period last year. According to senior executives of major automobile companies, diesel vehicle sales are likely to be negative in the current quarter.

Passenger car sales in the domestic market hit a 12-year low, declining by 25.71 per cent to 158,513 units in February as high interest rates and rising fuel costs continued to keep consumers off showrooms.

Mayank Pareek, chief operating officer (marketing & sales) of Maruti Suzuki India Limited (MSIL), said, “There has been some moderation in sales growth of diesel vehicles. While diesel vehicle sales at Maruti Suzuki increased by 54 per cent and 60 per cent in December and January, the growth rate tapered off to 22 per cent last month.”

Sales of petrol vehicles, too, which account for over 60 per cent of production for Maruti Suzuki, dropped by 21 per cent in February, compared to the 12 per cent fall registered in December 2012.

Maruti Suzuki has been clocking strong sales growth of diesel vehicles on the back of higher demand for Swift, Dzire and Ertiga. According to industry estimates, diesel vehicle sales declined to less than 40 per cent during October-December 2012 from a peak of 57 per cent in the previous quarter. Interestingly, the decline has happened after diesel price was raised by Rs 5 a litre in September 2012.

R C Bhargava, chairman, MSIL, said, “There are little signs to show that growth would be more than five-seven per cent in the coming fiscal.”

The company has a combined order backlog of 83,000 units of these three cars.

Diesel demand had previously been growing rapidly since the government decontrolled petrol in June 2010, leading to frequent price rises. After the decontrol, petrol became expensive by 26 per cent than diesel. Now, petrol is 40 per cent costlier than diesel. The price differential between the two fuels (which was even higher earlier) has been driving demand for diesel cars in the domestic auto industry.

“Before a price rise of around Rs 5 on diesel late last year, the monthly growth on diesel consumption this year was around 13 per cent. Now, diesel decontrol may pull down this growth,” said a senior petroleum ministry official.

Diesel prices were increased for the third time this year by 45 paise effective midnight today. After the rise, diesel prices in Delhi will stand at Rs 48.67 a litre, up from Rs 48.16 now.

The government is executing a phase-wise decontrol of diesel prices since January 17, to eliminate under recovery (the losses incurred by selling the fuel below the market price) by oil marketing companies (OMCs). The partial decontrol will happen through an increase of 45-50 paise a month, till the entire loss of OMCs is wiped out.

The overall under-recovery of OMCs projected during the current financial year is Rs 1,60,000 crore. Diesel accounts for 60 per cent of the revenue loss on sale of the three subsidised products — diesel, kerosene and domestic LPG.