High oil will hurt car sales

By Anandan Kerachan

Chennai

June 4: The fuel price hike announced by the Centre on Wednesday will have a negative impact on the car sales, especially, on the low-end cars.

Mr Ajay Parmar of Emkay Share Broking said, "There will be a negative impact on sales, but it won’t be a panicky situation. Someone planning to buy a car, especially lower-end, might think about the maintenance costs." However, the industry is not expecting any slide in higher end car sales.

Reacting to the price hike, Hyundai’s senior vice-president, Mr Arvind Saxena, said, "The current price hike has aggravated the woes of Indian consumers already reeling under high inflation. This move would further dampen the demand for new cars, as the industry is already under pressure because of the higher interest rates and the steep rise in input costs."

He sees high fuel costs to shift the demand pattern towards smaller and more fuel-efficient cars.

Raising similar concerns, a Maruti spokesperson said, "Sales will gradually recover. People will opt for more fuel-efficient cars."

The interesting part is that all leading carmakers have recently raised prices and will try to hold it.

While the petroleum secretary, Mr M.S. Srinivasn, confessed that the hike would have inflationary impact of 0.5 to 0.6 per cent, analysts expect it will lead inflation into double digits.