PETROL

VS
DIESEL
CARS
EXECUTIVE SUMMARY
Demographically and economically INDIAN automotive indutry i !ell poitioned
"or gro!th ervicing #oth dometic demand and e$port opprotunitie% A predicted
increae in INDIA& !or'ing age population i li'ely to help imulate #urgeoning
mar'et "or private vechicle%
There are num#er o" "actor !hich a(ect the automo#ile ector gro!th rate in
INDIA% )o!ever thi tudy i limited to conumer pre"erence "or dieel or petrol car
in maller car egment #aed on price o" dieel and petrol%
INTRODUCTION
Diesel and Petrol are strategic commodities; they play a vital role in the socio-
economic development of a country. Any uncertainty about their supply can impact
the functioning of the economy. In order to reduce this uncertainty it is important
to plan and use the resources judiciously. But, before planning, it is essential to
understand the consumption pattern of these products. entative information
pertaining to category-!ise overall consumption is available !ith different sources
but there is no correct picture available on category-!ise retail sales of Diesel "
Petrol, as it is not maintained by dealers operating the retail outlets. It is important
to note that during last one decade, retail share in total diesel sale has gone up from
#$.% to $&.' per cent in &(''-'&
he objective of the study is to find out effect of rise in petro prices on sales of cars
in I)DIA, in particular the effect on sales of petrol and diesel cars.
BACKGROUND OF STUDY
Though India i the !orld& "ourth*larget energy uer+ it per
capita conumption i among the lo!et in the !orld% Stagnant
output o" crude oil ha increaed e$ternal dependence "or it
ourcing ,--. on conumption #ai/ and a a reult crude oil
contitute the ma0or item in India& import #ill% Riing crude oil
price and volatility ha negative implication "or the Indian
economy and the am#ition o" putting the economy on a higher
gro!th tra0ectory%
In vie! o" the criticality o" energy uage "or economic gro!th+ it i
imperative "or India to "ormulate appropriate policie and
trategie that reduce dependence on crude and product import
and revie! pricing trategie o" regulated product+ epecially
dieel% Lac' o" in"ormation on ectoral demand o" dieel and
petrol not only poe a challenge "or ta'ing policy deciion #y
the 1overnment+ #ut alo create a de2ciency !hen it come to
demand etimation o" thee product% Thi neceitate
etimation and analyi o" dieel and petrol conumption trend in
di(erent ector3 u#*ector o" the economy%
The objective of the study is to find out effect of rise in etro rices on s!"es of
c!rs in #ND#A$ in !rticu"!r the effect on s!"es of etro" !nd diese" c!rs%
CONSU&T#ON 'ATT(RN OF D#(S() #N #ND#A
It is very important to understand the consumption pattern of diesel in I)DIA. he
consumption of the diesel in private sector *cars"+,s- has been around '%.. he
consumption in the sector can form part of rationale behind deregulating of diesel
prices in I)DIA.
*AR#AT#ON #N '(TRO) AND D#(S() 'R#C( O*(R Y(ARS
S.No YEAR Avg. PETROL
PRICE
AvG. DIESEL
PRICE
4 5665 57%88 59%57
5 5669 95%8 5-
9 566: 98%-8 96
: 5668 :5 98
8 566; :;%;: :6
; 566- :8 9<
- 566< :7 9;
< 5667 :7%8 9<
7 5646 85 :4
46 5644 ;8 :8
44 5645 -6 85
45 5649 -< 88
CONSU&'T#ON 'ATT(RN OF D#(S() AND '(TRO) O*(R Y(ARS
'R(*A#)#NG &ARK(T S+AR( OF '(TRO) AND D#(S() CARS #N
#ND#A O*(R Y(ARS
=aed on a#ove the "ollo!ing data ha #een ta#ulated>
S.
N
o.
YEA
R
TOTAL
CAR
SALES
PETRO
L CAR
SALES
%age
CHANGE IN
MARKET
SHARE OF
PETROL
CARS
DIESEL
CAR
SALES
%age
CHANGE IN
MARKETSH
ARE OF
DIESEL
CARS
%age
MARK
ET
GROW
TH
RATE
YoY
%MARK
ET
GROWT
H RATE
OF
PETROL
CARS,
YoY
%MARK
ET
GROWT
H RATE
OF
DIESEL
CARS,
YoY
4 6-*
6<
454-87
-
78-696 NA 5;68;- NA * * *
5 6<*
67
459754
7
75:546 *:%65 948667 ?:%65 4%- *9%8 56
9 67*
46
48-47;
;
44976:
;
*5%45 :95756 ?5%45 5%- 59 9-
: 46*
44
54;648
9
48:;59
-
*6%<< ;4974; ?6%<< 9%< 98 :4
8 44*
45
5;4<6-
5
49<-8-
<
*4<%8< 4596:7
:
?4<%8< 5%5 *46 466
The "ollo!ing ta#le ho! month& ale 2gure o" ma0or automo#ile eller ,top
t!enty car/ in INDIA elling at leat 5666 unit "or year 5649%
S.No MONTH!" PETROL
CAR SALES
DIESEL
CAR SALES
RATIO OF
DIESEL TO
PETROL
CAR
TOTAL
CARS
SOLD
#a$$%o&.
To 'ea%
((()
4 @AN&49 464<8 :4<:8 : 86666
5 AE=&49 9766 49:;; 9%8 4;666
9 BAR&49 <545 9<-4: :%8 :;666
: APR&49 45658 :674< 9%8 85666
8 BAC&49 44-44 99<:; 9 ::666
; @DN&49 5:47- :7:68 5 -8666
- @DLC&49 5564< :;;-8 5 ;<666
< AD1&49 5894: ;;8:5 5%8 76666
7 SEP&49 :;4;: 468666 5%9 4859:6
46 OCT&49 86666 456666 5%9 4-6666
44 NOV&49 :8:88 46:8:8 5%9 486666
45 DEC&49 :5:5: 7-8-; 5%9 4:6666
SOURCE* TEAM +HP
S.No MONT
H
PETRO
L
PRICE
DIESE
L
PRICE
DIESEL
VECHICL
ES SOLD
PETROL
VECHIC
LES
SOLD
VECHIC
LE
RATIO
FUE
L
PRIC
E
RATI
O
CROSS PRICE
ELASTICITY OF
DEMAND OF
DIESEL CARS
4 @AN&49 -:%95 89%4: :4<:8 464<8 : 4%: *
5 AE=&49 -8%<7 8:%5; 49:;; 9766 9%8 4%: *466
9 BAR&4
9
--%;; 8:%<9 9<-4: <545 :%8 4%: 5<%;
: APR&4
9
-8%54 8:%75 :674< 45658 9%8 4%: *4%;
8 BAC&4
9
;7%-9 8-%4- 99<:; 44-44 9 4%5 5%;
; @DN&49 -5%6< 8-%-7 :7:68 5:47- 5 4%5 7%;;
- @DLC&4
9
-8%-7 8-%;4 :;;-8 5564< 5 4%9 *4%5
< AD1&4
9
-<%;4 8<%59 ;;8:5 5894: 5%8 4%9 <%95
7 SEP&49 <9%;5 8<%<; * * * * *
SOURCE* TEAM +HP
FACTORS AFFECTING DEMAND OF VECHICLES
There are a large num#er o" "actor !hich either directly or indirectly impact the
demand o" automo#ile in India% Some o" them !e have tried to ummariEe #elo!%
)o!ever+ impact o" every "actor i not tangi#le% So our analyi !ill #e #aed on
ome o" thee "actor only%
Bot o" the "actor can #e #roadly categoriEed a "ollo!>
Bacro*economic varia#le> eg% 1DP component+ indutrial production+
inFation+ interet rate+ toc' indice
Sector varia#le> eg% Bodel launche+ vehicle price+ interegment competition
Ena#ler3#arrier> eg% Ainance availa#ility+ road connectivity
Ho,eve% o-% o./e012ve o3 41-56 24 1o 7'5 o-1 0o%%e8a12o' .e1,ee' 3-e8
$%20e a'5 0o'4-9e% $%e3e%e'0e 3o% 52e4e8:$e1%o8 0a%4
Reg%e442o' 9o5e82'g a'5 e8a4120216 o3 5e9a'5 ;ave .ee' 5e1e%92'e5, .-1
1;e a'a86424 5oe4 'o1 %evea8 1%-e 9a%<e1 $201-%e a4 'o. O3 o1;e% 3a01o%4
9e'12o'e5 a.ove $8a6 a' 29$o%1a'1 %o8e.
)o!ever i" contant gro!th rate i aumed ,let u ay 48. per year/ over the
year and actual ratio o" dieel to petrol car in any year i !or'ed on thi aumed
contant gro!th rate then the cro price elaticity o" demand calculated !ould
reult in meaning"ul concluion along !ith regreion modeling reult% Reult o"
#oth tudie i%e% aumed gro!th rate and thoe o" actual gro!th rate are preented
#elo!%
A'o1;e% a'a86424 ;a4 .ee' 5o'e a'5 $%e4e'1e5 .e8o, 1o -'5e%41a'5 1;e
e=e01 o3 $%20e o3 52e4e8:$e1%o8 o' 'o. o3 52e4e8:$e1%o8 0a%4 4o85 2' INDIA.
T;e a01-a8 %a12o o3 52e4e8 0a%4 1o $e1%o8 0a%4 24 0o9$a%e5 1o %a12o o3 52e4e8
$%20e a'5 $e1%o8 $%20e $%eva282'g 2' 9a%<e1 a1 a'6 g2ve' 129e.
1REEN LINE> VEC)ICLE RATIO
BA1ENTTA LINE> ADEL RATIO
F%o9 1;e a.ove 0;a%1 21 24 08ea% 1;a1 1%e'54 a%e 9a10;2'g 2.e. ,e 0a'
o.4e%ve 1;a1 1;e %a12o 24 ;ea52'g 2' 4a9e 52%e012o' 2.e. %a12o o3 52e4e8 1o
$e1%o8 0a%4 24 2' 82'e ,21; %a12o o3 $%20e o3 $e1%o8 1o 52e4e8.
REGRESSION E>UATIONS
F%o9 a.ove 5a1a 3o88o,2'g 0o%%e8a12o'4 ;ave .ee' 5e%2ve5 1o 7'5 o-1
3-1-%e 5e9a'5 o3 $e1%o8 a'5 52e4e8 ve;208e4 ,;28e a44-92'g 1;e 3o88o,2'g*
!. P%20e o3 $e1%o8 a'5 52e4e8 24 a44-9e5 0o'41a'1 a1 0-%%e'1 8eve84
?. O1;e% 3a01o%4 4-0; a4 GDP, 2'0o9e $a11e%'4 e10 a%e a44-9e5 0o'41a'1.
T;e 9o5e8 5e%2ve5 24 a4 3o88o,4*
No. o3 52e4e8 0a%4 4o85 $e% 6ea% 4;a88 .e #@)!(!(ABC??"DBEFYEAR. +a4e5
o' 1;24 9o5e8 21 24 3o-'5 1;a1 1;e $%o$o%12o' o3 52e4e8 0a%4 24 .o-'5 1o
2'0%ea4e 42g'270a'186 ove% 1;e 6ea%4. T;e 4a9e 9o5e8 24 2'@82'e ,21;
$%e52012o' 9a5e .6 CRISIL ,;20; 1oo 24 %e$%e4e'1e5 .e8o,.
CONCLUSION*
A harp rie in petrol price in the pat year "urther !idened it
gap !ith dieel price% Petrol price increaed #y 5: per cent+ !ith
the deregulation o" petrol price in @une 5646 that ena#led oil*
mar'eting companie to increae petrol price in line !ith any
harp rie in glo#al crude oil price% Dieel price+ !hich are till
regulated+ roe #y only - per cent% Due to lo!er price o" dieel
and !idening price gap !ith petrol+ there !a a urge in the
demand "or dieel model in mot o" the paenger vehicle
egment+ depite the petrol variant #eing priced cheaper%
Another complementing "actor !a the relatively higher "uel
eGciency o" dieel model ,Efciency of diesel on average is 30 per
cent more than petrol/% Thee t!o "actor can #e preumed to #e
the prime reaon "or impacting the ale o" petrol vehicle% Bany
model that !ere o(ering #oth the "uel option+ the dieel
variant accounted "or a much a <6. o" ale during 5644*45%
On the #ai o" a#ove tudy !e 2nd that the proportion o" dieel
car ale to total ale ha teadily rien "rom 54%:. in AC6< to
5<%:5. in AC44% )o!ever+ in AC45+ at leat :6. o" the total car
old in the country run on dieel.
Seeing thi trend many top ma'er li'e Baruti+ )yundai and Aord
have announced invetment to #oot dieel engine capacity%
)o!ever+ in cae o" complete deregulation o" dieel price+ there
may #e ome moderation in the ruh "or dieel car%
Re3e%'0e4*
4% TEAB =)P> Ratio o" dieel to petrol car
5%CRISIL
9% PPAC