Petrol, diesel hike: Negative impact on automobiles - Views on News from Equitymaster

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  • Aug 31, 2000 - Petrol, diesel hike: Negative impact on automobiles

Petrol, diesel hike: Negative impact on automobiles

Aug 31, 2000

The Maharashtra government's decision to raise sales tax by 2% on petrol and 1% on diesel with effect from today is likely to have a negative impact on automobile sales in the state. As a result of this, a litre of petrol will be dearer by Re 0.45 and a litre of diesel by Re 0.13. Commercial vehicles sales across the country have been on a decline over the past couple of months, due to sales tax rationalisation in certain states and softening in freight rates. Passenger car sales too have seen a slowdown in the past few months due to the sales tax rationalisation. This is not the best news to hit automobile sales in the state just before the beginning of the festive season. This could result in sales being postponed as the industry is already facing problems of lacklustre sales.

FY98 Statewise Vehicle Population
  (Nos.) % to total
Maharashtra 4,930,571 12.2%
Gujarat 4,114,515 10.2%
Tamil Nadu 3,577,053 8.8%
Uttar Pradesh 3,492,571 8.6%
Andhra Pradesh 3,023,766 7.5%
Delhi 2,985,862 7.4%
Madhya Pradesh 2,817,471 7.0%
Karnataka 2,749,793 6.8%
Punjab 2,343,169 5.8%
Others 10,422,746 25.8%
Total 40,457,517 100.0%
Source: ACMA

As Maharashtra lists very high on industrial and commercial activities, it accounts for a fair share of automobile sales. It accounts for 14% of passenger car sales, 22% of LCV sales, 11% of truck sales and 6% of bus sales.

Hence this would negatively impact some of the leading automobile players like Telco, Mahindra & Mahindra and some car manufacturers. This news coupled with monsoons and slowdown in industrial production will act as a drag on sales.

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