Fuel efficiency key consideration amid fuel price rise, says HSBC report

With petrol and diesel prices at an all-time high, fuel efficiency and maintenance costs have become key considerations for consumers purchasing vehicles, especially in the sub Rs 10 lakh segment.

“Our channel interactions suggest that customers are increasingly becoming considerate of the recent rise in fuel prices,” HSBC Global Research said in a recent report. “In the current environment, we believe cars that have higher fuel efficiency and lower maintenance costs should gain relatively higher traction among buyers, especially in the less than Rs 10 lakh category, which is still 70% of the market in India,”

Fuel prices in the country have increased by 35% in the past 15 months.

Increased consumer focus on fuel efficiency is likely to strengthen market leader ’s competitive position, HSBC Global Research said in the report dated September 28.

Fuel efficiency of Maruti Suzuki vehicles has improved by 15-30% in past 10 years, it said. Fuel efficiency of Swift/Swift Dzire, for instance, has increased 30% to 23.3 kmpl from 18 kmpl nearly 10 years ago, while that of WagonR and Ertiga has gone up by 15% and 19%, respectively, the report said.

Maruti Suzuki’s corporate average fuel efficiency stands at 21.3 kmpl, compared to 19.3 kmpl for Hyundai and 18.3 kmpl for

.

“MSIL is also on track to achieve the impending RDE (real driving emission) norms although we expect an impact on car prices yet again,” the report said.

Maruti Suzuki’s average fleet emissions is 20% lower than most of its peers, according to data available with the Ministry of Road Transport and Highways (MoRTH). This is due to higher share of smaller cars in company’s sales volumes.

There is a strong demand for CNG-powered vehicles amid the sharp rise in prices of petrol and diesel. Sales of CNG vehicles are expected to grow by more than 60% in the ongoing financial year, the HSBC report said.

This will help further reduce Maruti Suzuki’s emissions, the report said.

Maruti Suzuki dominates CNG car sales in the country with almost 90% share. Hyundai Motor India is the only other carmaker selling CNG cars in India.

Share of CNG cars in Maruti Suzuki’s overall sales stands at 16%. For models that come with CNG option, the penetration is at 32%. In markets such as Delhi, Mumbai and Pune where the fuel is readily available, CNG penetration stands at around 70% in models which offer the option.

New model launches next year in the SUV segment though would be key for the company’s growth in the medium term. Maruti Suzuki is scheduled to launch a midsize SUV in 2022.

“Launches are also the most critical driver of margins for any OEM. Successful launches not only lead to higher volumes but also more importantly improve pricing power and variant mix”, the report said.

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