The government today gave freedom to state-run oil companies to raise price of diesel. This may affect the automobile industry especially the diesel based engines. In an interview to CNBC-TV18, RC Bhargava, chairman, Maruti Suzuki says that diesel price hike is unlikely to affect their sales. “We have a waiting list and our ability to sell cars is constrained by our manufacturing capacity not by the market conditions or by the models we have,” he adds.
Further Bhargava says that for their diesel expansion in Gurgaon, 600 thousand diesel cars are likely to be installed by 2014-2015 which will be less than 50 percent of their sales by then.
Below is an edited transcript of RC Bhargava’s interview on CNBC-TV18
Q: You just declared you numbers and we have seen that your sales are down given the high fuel prices. That is something you have been talking about always. Do you think now that sales will be hit further for companies like yourself because of this diesel price hike?
A: Diesel price hike will not affect our sales at all. We have a waiting list and our ability to sell cars is constrained by our manufacturing capacity not by the market conditions or by the models we have or anything like that. This small correction in the price made by the oil companies that has been projected, I don’t think it will have any significant impact on our sales, in fact none. Our diesel sales will continue to be at the level of our production capacity.
Q: What about the larger impact on the industry itself, what are you anticipating that it will be like?
A: As far as the industry is concerned, if these small increases in price carry on a regular basis as appeared in the press at one time, there will be Rs 1 a month for 10 months, so at some point of time the customer will find that the cost of ownership of a car has become even higher and to some extent that would impact the diesel cars sales.
Q: What about expansion plans? You have some aggressive expansion plans as far as your diesel cars are concerned. Do you think there will be some review now?
A: The diesel expansion which we are doing at Gurgaon is to install a capacity of 300 thousand units a year of which 150 thousand units will be installed by September this year. Another 150 thousand units by the same time next year. With this our total engine capacity for diesel would be 600 thousand. 600 thousand diesel cars would be well below 50 percent of our sales in 2014-2015. I don’t think that even if diesel prices reach Rs 10 level projected today, as being required to stop under recoveries, I don’t think diesel car sales will drop below 50 percent of the market.