Indian Automobile Industry Hails Government's Decision to Decontrol Petrol Prices

Strategic Insights -

The Indian automobile industry has welcomed the government's decision to decontrol petrol prices, with industry body Society of Indian Automobile Manufacturers (SIAM) praising the move as "the only prudent approach for a rapidly growing economy." The industry expects the decision to supplement the growing economy and maintain its growth momentum despite the rise in fuel prices. The government's move to free petrol from pricing controls and hike rates by up to Rs 3.5 per litre is expected to have minimal impact on vehicle sales.

Key Takeaways:

  • The Indian automobile industry has hailed the government's decision to decontrol petrol prices, terming it as the "only prudent approach" for a rapidly growing economy.
  • The industry body Society of Indian Automobile Manufacturers (SIAM) expects the decision to supplement the growing economy and maintain its growth momentum despite the rise in fuel prices.
  • SIAM President Pawan Goenka praised the move, saying it is the "only prudent approach for a rapidly growing economy like India."
  • The industry anticipates that the fuel price hike will have no significant adverse impact on sales of vehicles due to buoyant market demand.
  • However, SIAM Senior Director Sugato Sen had earlier expressed concerns that the price hike will have a negative impact on sales in the short-term.
  • Industry leaders, including Maruti Suzuki India Chairman R C Bhargava and General Motors India Vice-President P Balendran, expect the industry to maintain its growth momentum despite the fuel price hike.
  • Bhargava noted that prices will rise and freeing fuel prices is inevitable, adding that the industry will be affected in the short-term but will be able to absorb the impact in the long run.

Statistics:

  • The Indian auto industry grew by over 26% in 2009-10 compared to the previous fiscal, with a total of 1,22,92,770 units sold.
  • The government has freed petrol from all pricing controls, hiking rates by up to Rs 3.5 per litre.
  • Diesel rates were also increased by Rs 2 a litre.
  • In the past, petrol prices once ranged from Rs 2-3 per litre, yet car sales were minimal.

Sources:

  • Asia Pulse
  • PTI