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Effect of hike in diesel car prices only temporary: Analysts
Posted on 08 Jun 20128,641 Views Comments
The hike will be a one-time cost for buyers. Customers are paying more attention to running and maintenance costs which will more than offset the hike impact.
The government is contemplating hiking the excise duty on diesel cars to deter the well-off from exploiting the subsidised fuel. The hike is unlikely to alter the demand for diesel vehicles in the long term, an Edelweiss report noted.
Should the duty be hiked, the impact on companies like Mahindra & Mahindra and Maruti Suzuki will only be a short-term phenomenon.
"If the government hikes excise duty on diesel cars, Mahindra & Mahindra will be the worst hit as almost 100 percent of its product portfolio comes under the diesel category. To some extent, Maruti Suzuki will be impacted as 30-35 percent of its portfolio is diesel.
However, the hike will be a one-time cost for buyers. Customers are paying more attention to running and maintenance costs which will more than offset the hike impact. This will help diesel car manufacturers in the long term," Ashwin Patil, Research Analyst at LKP Securities, said.
"A modest hike of 2-3 percent is not likely to affect demand for diesel cars as seen in Maharashtra due to a long waiting period of 3-6 months," the Edelweiss report said.
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