Fuel Price Spike To Hit Car Sales
The hike in petrol, diesel prices will fuel a slowdown in the auto industry in the short-term, feel car majors like Maruti, Hyundai and Honda. And, it may spell good news for consumers in terms of lower prices and greater discounts from car makers, who will try to offset the negative impact on the industry, which is already hit by higher interest rates and tighter retail financing.
Vaishali Jajoo, auto analyst at Angel Broking, said the effect would be spread across product categories in the auto industry and would hit sales of cars, two-wheelers and commercial vehicles. “This just adds up to the already prevailing negative sentiments,” Jajoo said from Mumbai. Amit Kasat of Motilal Oswal said the slowdown could last for about two months, though things are likely to stabilise thereafter.
Diesel cars could also be preferred over petrol, considering the fuel is cheaper. Also, alternate fuel options like LPG and CNG could be in demand. “There can be a further shift to diesel cars from petrol. However, a big shift to LPG/CNG versions may be restricted due to their limited availability,” Jajoo said.
The stocks of automobile companies suffered as investors fear further erosion in profitability as companies would need to spend much more on discounts and advertisements to push sales. Auto index fell by 3.3% on BSE.
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