Fuel price hike will affect auto sales in short term: SIAM

Fuel price hike will affect auto sales in short term: SIAM

New Delhi: The Indian automobile industry on Friday said that the hike in fuel prices will dampen sales in the short term, but exuded confidence that it will be able to maintain the growth momentum in the long run.

The industry, on the whole, welcomed the move to free petrol from pricing controls.

“It (price hike) will have a negative impact on sales in the short term," Society of Indian Automobile Manufacturers (SIAM) senior director Sugato Sen told PTI.

Commenting on the development, Maruti Suzuki India chairman R C Bhargava said that across the world, the free pricing policy prevails and still the industry progresses.

“This is good and sound step by the government," he added.

On the possible impact on sales, Bhargava said: “In the short term, sales of small cars may jump more, while big cars may witness a slowdown in sales."

He, however, said such a situation, if it takes place at all, will be a temporary phenomenon.

“The auto industry will maintain its growth momentum," Bhargava added.

Expressing similar views, General Motors India vice president P Balendran said that prices were bound to rise and the decontrol was almost sure to have happened.

“No doubt, the industry will be affected in the short term, but in the long run we will be able to absorb the prices," he said, adding any affect will last for about three months only.

The industry said irrespective of the fuel price hikes in the past, vehicle sales have grown and it would continue to do so.

“Petrol once used to cost Rs2-3 (per litre) and still sales of cars were minimal. While with prices hovering around Rs50 (per litre), sales have jumped to their highest levels. Even if prices increase, industry will continue to grow," Bhargava said.

The Indian auto industry has been growing at over 26% selling a total of 1,22,92,770 units in 2009-10.

The government on Friday freed petrol from all pricing controls and hiked the rates by up to Rs3.5 per litre. Diesel rates were also increased by Rs2 a litre.