Moneycontrol
Last Updated : Sep 16, 2014 11:55 AM IST | Source: Moneycontrol.com

Buying a car? Why petrol vehicles make more economic sense

According to a Crisil report, the breakeven period after buying a costlier diesel car, compared to a petrol vehicle, has moved up from 2.4 years in FY2012 (when the differential between the fuel prices was at the maximum) to an estimated 5.6 in FY2015.

 
 
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Moneycontrol Bureau

As petrol prices skyrocketed over the past several years, diesel cars had started outselling petrol cars by about 7 to 3 at one point, due to their low running costs and higher fuel economy.

However, as the government decided to increase prices of subsidized diesel till it finally reached market levels – and after the price differential between petrol and diesel cars widened due to the increasing demand for the latter -- it now becomes clear that the economic sense to invest in a diesel four-wheeler has reduced drastically.

According to a Crisil report, the breakeven period after buying a costlier diesel car, compared to a petrol vehicle, has moved up from 2.4 years in FY2012 (when the differential between the fuel prices was at the maximum) to an estimated 5.6 in FY2015.




The report has arrived has taken into account the costs associated with the Maruti Suzuki Swift, one of the country’s largest-selling vehicles, even as the breakeven is in the same range for vehicles in a similar price bracket while it moves to 9.5 years for more expensive cars such as the Skoda Superb.

The math is this: the typical difference between a similar-trim petrol and diesel Swift would be Rs 1.04 lakh (Rs 4.42 lakh versus Rs 5.46 lakh, ex-showroom Delhi), 40 percent of which can be recovered during the vehicle’s resale.

With a 23 percent differential in the mileage (18.6 kmpl versus 22.9, ARAI figures) and a Rs 9.54 per litre differential in fuel (Rs 68.51 versus Rs 58.97, Delhi prices), the savings on running a diesel vehicle would be Rs 11,082 per year if it travels 10,000 kms a year.



Crisil assumes that maintenance costs for both vehicles are similar.

If the vehicle, however, clocks a higher annual run, of 15,000 kms or 20,000 kms, the breakeven reduces to 3.8 years and 2.3 years, respectively.



The tilt in economics back towards petrol vehicles has already resulted in showing up in sales numbers: petrol vehicles have already started outselling diesel vehicles, according to some reports. Crisil forecasts petrol vehicles to account for 55 percent of car sales this year compared to 42 percent in FY13.



“The ownership cost equations will change if car manufacturers decide to reduce the price premium for diesel vehicles, which is a possibility given the converging fuel prices,” Crisil said, pointing out that the average premium charged on a diesel car is 25 percent in India (compared to a petrol car) while the same stands at about 10 percent in Europe.

The analysis, however, is restricted to small cars such as hatchbacks and sedans rather than utility vehicles, where higher torque levels, etc, tilt the decision in favour of diesel variants.

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First Published on Sep 16, 2014 11:47 am
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