[YVES]

Maruti Suzuki cutting down the production of its petrol cars following the hike in petrol prices last week after fall in May sales figures. With Maruti Suzuki not having the production lines to ramp up the growing demand of diesel engines for its swift diesel variants, This is a double whamy. So has its strategy gone wrong and will Tata,VW,Fiat & Skoda gain from focussing more on Diesel variants?

[scopriobharath]

This was expected. When we auto enthusiasts are able to predict that Petrol prices will rise fast, Honchos who are paid millions for thinking about business strategy must think better than most of us. Its almost doomsday for Petrol cars in India and slowly Diesel would take over as the fuel.

The honchos should have planned for the parallel ramp up of its diesel line too. Even if that 20% tax on diesel vehicles is implemented, people will still buy diesel as this is a onetime cost but fuel is a recurring cost.

A person buying an i10 will probably settle for a basic model of Indica eV2 diesel.

A second hand safari for 6 lacs makes much more sense than a new petrol hatch now.

[teamveevee]

Originally Posted by YVES

Maruti Suzuki cutting down the production of its petrol cars following the hike in petrol prices last week after fall in May sales figures.

If there are no takers for petrol cars, why would they keep producing petrol cars and offer discounts. It makes business sense to concentrate on high demand diesel models. In fact all manufacturers should stop Petrol cars production and Oil companies should stop distributing petrol and convert the existing Petrol dispensers to dispense Diesel to reduce the line at the diesel pump. Once there is only Diesel cars, there is no question of additional diesel tax etc.

[sgiitk]

This is to be expected, with the silly pricing moving the change over point to under 10,000km per annum. Today furnace oil is costlier than diesel!

[volkman10]

Originally Posted by YVES

This is a double whamy. So has its strategy gone wrong and will Tata,VW,Fiat & Skoda gain from focussing more on Diesel variants?

Why do you think so? Maruti Suzuki is it right, going on slow with Petrol variants and thus freeing the production space for the highly in demand diesel vehicles!

Cheers!

[BlackPearl]

Originally Posted by scopriobharath

A second hand safari for 6 lacs makes much more sense than a new petrol hatch now.

This is not going to work. A Safari will give a mileage of 10 kmpl while a petrol hatch will give a mileage of 14-15 kmpl. So the advantage of lesser price of diesel is not going to benefit the customer. Moreover the maintenance cost of a diesel vehicle will be more than a petrol one. Plus a Safari will have higher road tax and insurance .

[alpha1]

Hooray!
Soon we will have all cars and bikes running on Diesel, and then govt will have to think twice milking the "common man" (petrol users) to subsidize the other "common man" (diesel users)

[msdivy]

If petrol users go down, what is Govt going to do with excess petrol? They cannot extract only diesel from crude oil.

[JustCause]

Originally Posted by BlackPearl

This is not going to work. ....one. Plus a Safari will have higher road tax and insurance .

My Alto costs me ~3.94 Rs/km (FE 18km/l) given the current fuel prices. A Mahindra Scorpio costs about 3.5 Rs/km (FE= 12-15 km/l). Even if I factor in the maintenance expenses, I stand to lose about 5-7k per year with an annual running as low as 6000kms.

IDV of second-hand cars is low & hence you can strike a value deal with the insurance company.

A lopsided growth is occurring in the auto industry & a nationwide diesel shortage is a soon-to-be-outcome.

Originally Posted by alpha1

Hooray!
Soon we will have all cars and bikes running on Diesel, and then govt will have to think twice milking the "common man" (petrol users) to subsidize the other "common man" (diesel users)

Bikes already run on CNG, albeit illegally in Delhi/NCR

[sarathlal]

First of all, the diesel was never meant to be used this way, for personal transport. Now, the pricing policy has been so done, people are forced to use the subsidized fuel for very personal use.
This will simply multiply the demand and consumption of diesel and to offset the increase in loss via diesel, petrol will be priced even higher.

This vicious circle is clearly defeating the purpose and even word meaning of 'subsidy'.

[ghodlur]

Originally Posted by JustCause

Bikes already run on CNG, albeit illegally in Delhi/NCR

How is this being done?

Blame it on the ever sky rocketing prices of petrol and this is spooking the customers who now think the petrol cars as untouchables. Just a month back during the Ertiga launch I used to see the Fort Point Maruti dealer on the busy Ghodbunder Road in Thane fighting for the parking spaces for customers and last week it looked as if the dealer was rocked by Typhoon Katrina. Such a contrast.

Although I saw the True Value division of the Fort point flooded with many cars I presume petrol cars for sale.

[mxx]

It was bound to happen. Why is it wrong? they are not scaling down capacity, only cutting down the output. They can increase anytime the fuel pricing situation and/or demand trends change.

[anoopap]

High diesel consumption v/s low petrol consumption will ease pressure on govt to cover subsidy costs.

They will now be able to marginally increase diesel prices (1-2 rupee) instead of going for 4-5 rupee increments to cover same subsidy costs. This in turn, will ease pressure on petrol prices; as govt will not have any significant benefit in further increasing the price of low consumption petrol.

But current scenario will not continue for ever. Wrong decisions are bound to be corrected. Hasty decisions to change capacity could prove to be a gamble in long term perspective.

[libranof1987]

Coming to topic, I don't think MS has lost any plot; they are just reacting to the market trend.

If the trend continues, they could use the resources - machine and man earlier employed on the assembly line for petrol cars for diesel cars. They already have Ritz, Swift and SX4 diesel; now for a diesel Alto.

The market itself is so volatile given various factors that there can't be a set strategy; companies would have to continously evolve.

[supremeBaleno]

If petrol prices are rising and thus resulting in sales of petrol cars sliding (as can be clearly seen in the monthly sales thread), what should a manufacturer do ? Cut down on making petrol cars and use the freed up capacity for making diesel. And if this is what MSIL is doing, am not sure how the OP thinks they have lost the plot ?

Am not a diesel-head and frankly am not in favour of everyone turning diesel because the prices are kept low compared to petrol, but that is something the policy makers have to work on to rectify. Maybe a good stiff tax on diesel cars would be a good starting step.

Hmm. this happens to be my 4000th post.