Petrol Price Hike Hits Car Sales: What Car will You Buy? Petrol or Diesel

Owing to the increase in the price of petrol and the high interest rate of vehicle loan, the car makers in India have registered only a modest growth in sales volume in the month of May. Only manufacturers focused more on diesel models had any considerable increase in sales. Buyers tend to prefer diesel models over their petrol counterparts. So, what will you buy? A petrol car or a diesel car?

In March last there was a record increase in car sales, a 20% increase overall. But in April, the story was just the opposite. April recorded the lowest growth in the past ten years, just 3%. The story in the month of may, 2012 does not show much improvement.

Percentage Increase in Car Sales for the Month of May, 2012

Manufacturer                                % increase in car sales (cars, Uvs and vans)
Maruti Suzuki                                   -4
Hyundai                                            3
Mahindra & Mahindra                         27
Tata Motors                                      6
Toyota Kirloskar                               108

 It is quite evident from the above figures that manufacturers focusing more on petrol models, like Maruti Suzuki and Hyundai are the worst hit. Maruti Suzuki who boasts of the highest market share, recorded a decrease in sales of 4%. There was an overall 29% dip in sales of popular compact petrol cars like Alto, WagonR and A-Star. The sales of SX4 went down sharply by 85%. It is the utility vehicle segment with the entry of Ertiga that really helped.

 There is a meager increase in sales for the Hyundai thanks to the demand in models like Verna and Eon.

 Manufacturers having popular diesel models performed much better. Mahindra & Mahindra recorded an increase in sales of 27%, not bad at all. Toyota saw the sales doubling, the percentage increase being 108%. This is mainly due to the good response to their models Innova and Etios. Tata motors had only a 6% increase in sales volume. Their small car model Nano with an increase in sales of 31% helped to achieve this. Ford Motors recorded a 14% drop in sales while the drop was 27% for General Motors.

Which will you buy? Diesel Car or Petrol Car

The price of petrol is likely to increase. Even if it gets decreased a little occasionally, it is often followed by a sharp increase. But diesel price does not increase at the rate of petrol. This is because of the Government subsidy for diesel. Government cannot raise diesel price sharply as it will increase the price of everything as the fuel for trucks is diesel.

Due to the constant increase in petrol price people are increasingly opting for diesel cars. Due to this, the resale value of petrol cars has diminished greatly. In the small car segment, the diesel model costs somewhat Rs. 100000/- more than its petrol counterpart. So, if you are ready to pay that much more, it is advisable to buy the diesel model.

Some may argue that if you intend to use your car only occasionally, it is better to buy a petrol car when taking into account the interest on the additional Rs. 100000/- or so you have to pay for the diesel model. But in the present circumstances, I don’t think this argument holds good. Why? Because, the petrol price is going up in a very fast rate and the price of diesel does not increase that much. Another factor to be considered is the poor resale value of petrol cars as a result of the increasing petrol price.

Yet another argument in favor of petrol car is that the diesel model requires more maintenance. But it is not true with the new generation diesel engines. New generation diesel engines are as refined and as reliable as the petrol engines. They have high pick up, low vibration, low heat etc., much like a petrol engine. In fact you won’t feel any difference at all between the two. So you can very well opt for the diesel car if you can afford to spend an additional amount of some Rs. 100000/- or so. You won’t regret it later.