Skyrocketing fuel prices fail to dent passenger vehicle demand

Car bookings and retails remain strong on the back of positive factors like strong economy, pent-up demand and general positive sentiments about the pandemic being in some kind of control suggesting soaring fuels prices are yet to affect consumer sentiment in the automotive sector.

While passenger vehicles do not see much dampening in demand in the short term, it is two-wheeler sales that is being hurt as the price conscious buyer is staying away, experts said.

The uptick in auto demand depends on a combination of factors and rarely on a single factor. Although the fear of a second wave of Covid-19, fuel and input price hikes and inflationary pressures are factors that could impact off-take in the long run, they said.

"We still see steady bookings and retail sales. This could also be because of the supply issues plaguing the industry,” said Shashank Srivastava, ED of the country’s largest car maker, .

“In the short term, there are pending orders which will tide us through. In the long run, if it continues, we may see some softening in demand”, said Naveen Soni, senior VP, Toyota Kirloskar.

In times of high fuel prices, consumer sensitivity for fuel efficiency goes up and there is a concern on the running cost per kilometre. Petrol and diesel prices have increased 24 times in 2021, going up by ₹6.87 and ₹7.10 per litre, respectively. Fuel prices may increase further as retail prices need to balance out with global movements.

However, if the price gap between petrol and diesel widens, demand for petrol models may be dented. Consumer buying sentiments are skewed towards small entry level cars and less for SUVs, feels Srivastava. Soni adds that for the consumer, it doesn’t matter which fuel type vehicle he is primarily driving, his concern is only to have a more fuel efficient vehicle.

The continuous small increase in fuel price from January 2021 is something that on a cumulative basis could impact consumer sentiment. The industry after a series of events has started showing signs of recovery and we do hope that this would not affect sentiments negatively. At Mahindra we have a portfolio of gasoline engines which will be available across our range of SUV s and is already available on XUV 300 and Thar says Veejay Nakra,CEO , automotive ,Mahindra & Mahindra.

With the low running cost for CNG compared to diesel and petrol, there is an uptick in demand for such vehicles too.

“PV sales are not yet playing a spoilsport. We do not see any dampening in sales as there is a long waiting period, especially for SUVs,” said Vinkesh Gulati, president at FADA.