The winds of change are sweeping the car industry once more as automakers are now looking to realign their output for the New Year to meet buyer preferences which now appears to have shifted to petrol power from diesel. Obviously the most major factor contributing to this trend is the fact that the gap between the prices of diesel and petrol has reduced to around Rs 10 rendering the premium on diesel cars unnecessary burden to bear.
A report from the Economic Times suggest that sale of petrol engine cars has been on the rise over the last few months and has now reached around a 58 per cent share of total sales and is expected to go to 60 per cent over the next few months.
The Centre in June 2010 deregulated petrol prices but did not touch diesel due to a wide range of factors. This lead to a situation where the price of diesel had only an increase of Rs 1 between June 2010 and June 2011 while the price of petrol in the same period had an Rs 12 increase. The gap began to increase further until the Centre stepped in once more and reduced it subsidy. In January 2013, the govt began to add 50 Paise to the pump price till the latter got aligned with market rates.
Now with falling international oil prices, it was found that that the oil companies were making a profit on every litre of diesel being sold prompting the Centre to deregulate prices in mid-October. We believe that fuel prices will now stay on a similar level (Rs 10-Rs 12 difference) prompting the premium charged on diesel cars to reduce and consequently for their prices to reduce.
