Real-time Stock quotes, portfolio, LIVE TV and more.
Jul 12, 2012, 08.23 AM IST
Shashank Srivastava, executive director of Maruti says, there has been a shift in demand towards diesel. "Because of the high running cost, the petrol vehicles demand has been coming down. There would be pressure on petrol vehicles for a long time to come,” he adds.
There has been a shift in demand towards diesel. Because of the high running cost, the petrol vehicles demand has been coming down. There would be pressure on petrol vehicles for a long time to come.
The difference between petrol and diesel price is quite huge now. In an interview to CNBC-TV18, Shashank Srivastava, executive director of Maruti says, the difference is almost Rs 25-26 now, even after the recent cut in the petrol prices. “There has been a shift in demand towards diesel. Because of the high running cost, the petrol vehicles demand has been coming down. There would be pressure on petrol vehicles for a long time to come,” he adds.
He further says, the company may not meet 10% growth target in FY13. However, he sticks to guidance of 400,000 diesel vehicle sales in FY13.
Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.
Q: The key concern is on the back of the number of shutdowns that we are hearing about, what is the situation on the ground? How much has demand got crimped by for petrol vehicles?
A: Since June 2010, when the difference between petrol and diesel was minimum, it was about Rs 9.83 at that time, we have seen the difference growing up to almost Rs 25-26 now, even after the recent cut in the petrol prices. So, obviously there has been a shift in demand towards diesel. Last year, in the industry, almost 46% was diesel. But if you look at vehicles in which diesel variants were available, more than 80% of the demand was diesel. So, there has been a shift. Because of the high running cost, the petrol vehicles demand has been coming down.
Last year, there was a huge mismatch in terms of the demand pattern. That has further extenuated this year. The difference between the last and this year is that now there seems to be a clear direction and manufacturers are focusing on more supply for the diesel vehicles. That’s what we have been missing now. There would be pressure on petrol vehicles for a long time to come.
Q: Can you give us some numbers on what kind of inventory build-ups you have seen? What kind of production shutdowns Maruti is considering and has been going through?
A: If you have seen the reports, as any other OEM (Original Equipment Manufacturer) we have certain inventory. If the inventory exceeds certain level, we obviously control the production. This week, starting Monday onwards, we have been having this block shutdown which we have every year. We have two weeks of shutdown, once in June and once in December. We are actually currently going through that shutdown starting Monday. We will be reopening again on next Monday. So, a lot of this correction of inventory happens because of this shutdown period. Yes, you are right, there is a pressure on petrol vehicles inventory. That’s only one of the challenges which automobile manufacturers are facing at this time.
Q: How do you think the balance works out in terms of the fall in demand for petrol versus the rise in demand for diesel? Are you reworking your volume targets or do you think diesel will manage to pull through?
A: If you see 2006-07, the number of vehicles, which were available with brands, diesel was just 30 and petrol was about 18. So, you had a total of 48 brands. Today, you have pure petrol still around 18-19 and 82 diesel brands. So, clearly the direction, which OEMs have been following, is to try to get to this demand which is being created for diesel vehicles. That’s one.
In 2010, we introduced five models with CNG. I feel that there would be a demand for CNG products in the future, especially if you have a much better retail arrangement for CNG pumps. Currently, we have only for the three places in Gujarat, NCR and Mumbai. So, there is a lot of potential there. The OEMs have realised that they need to have products. They have done it in diesel. They are now doing it for alternative fuels also.
Third, if you look at diesel vehicles, one of the things, which manufactures like Maruti Suzuki have done, is that they have increased their number availability for diesel vehicles. Last year, we had capacity constraint. We were doing about 245,000 diesel vehicles. This year, we plan to do 400,000 because we have an additional supply arrangement for diesel engines. We have also decided to invest in diesel engine plant. For that, the benefit would be available probably in 2013. We have identified that diesel and CNG are fuel types which are here to stay. Therefore, we better do something about it.
Finally, we have to also carefully monitor the total pie. So, while we keep on saying here is the cake, it’s divided between diesel and petrol, but we have also to see that the cake is not getting bigger the way we would like it to be. So, there are growth problems. Therefore, we also need to see that it is not just a shift of demand from petrol to diesel, but the overall demand for automobile itself remains a cause of concern.
Action in Maruti Suzuki India
Jun 19 2013, 23:15
- in MARKET OUTLOOK
Jun 19 2013, 12:44
- in MARKET OUTLOOK