Visit the global automotive industry news blog with Asia automotive industry news and India automotive industry news.
Avneet Jolly and Anupam Prakash
ASIA: "“India: Automotive Design Engineering in India: No 'one-size fits all' report. 60-page report by MediaTechnical Ltd.
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India: The Effects of Fuel Subsidies - Policy reform underpins fuel duel
Outside of Europe, India is one of the most prominent markets for diesel powered light vehicles and this eminence is the result of long-standing policy support. But, with pressure to remove fuel price controls mounting, India's automotive sector is approaching a pivotal crossroads.
Policy background
To shield the Indian economy and consumers from the adverse impacts of international oil market volatility, the government regulated consumer prices for four sensitive petroleum products: petrol, diesel, domestic liquid petroleum gas (LPG) and kerosene. Roughly $17 billion in annual fuel subsidies relied on financial support from public sector companies by way of price discounts and government oil bond issuances.
Petrol deregulation gives rise to diesel
Given significant price imbalances and rising global oil prices, the government announced revisions to national fuel policy in mid-2010 beginning with petrol, which was implemented a year later. Deregulation increased the differential between petrol and diesel, thereby shifting consumers further toward diesel powered vehicles. With diesel subsidised by ~9 rupees per litre below cost in late 2011 (resulting in diesel prices roughly two-thirds that of petrol), some manufacturers struggled to meet consumer demand for diesels and others have discontinued petrol engine options on certain models.
Recognizing this market disturbance and the heavy expense of diesel subsidies, the government is debating diesel deregulation/taxation in its forthcoming annual budget. As a result, future automotive investment decisions are being clouded and further complicated by the adoption of LPG and compressed natural gas (CNG) vehicles, evidenced by New Delhi and Mumbai's transport and taxi fleets. Regardless of the ultimate policy action, India's skewed fuel demand patterns will likely be subject to change.
Developing a long-term market view
Although the current situation has brought near-term uncertainty to India's automotive operating environment, Autofacts' expectation that India's light vehicle market will increase from 2.8 million in 2011 to 6.5 million by 2018, emphasises the importance of long-term strategic planning. At 2018's forecasted market level, the difference between a diesel penetration level of 50% (an extrapolation of the current trajectory) or 30% (its former level), is 1.3 million units. Such a margin is a powerful lever on investment related to product planning, technology development, supply chain management, export capacity, and/or infrastructure. This dynamic illustrates the profound influence that government policy has on the fundamentals of automotive sector growth.
Source: PwC Autofacts - GAI
The Circuitous Path to Electrification of China’s Automotive Industry
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China Automotive Monthly: Executive Summary (January, 2012)
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Indian Auto Components Industry: Brief Introduction (and downloadable Report)
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Indian Automobile Industry: Brief Introduction (and downloadable Report)
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Philip Kotler sees India emerging as a leader in car manufacturing
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India: Duty hike will hurt automotive industry
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India: The Effects of Fuel Subsidies - Policy reform underpins fuel duel
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Indonesia's Car Market Takes the Fast Lane
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Japanese Auto Industry in Japan
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Expats Flock to India Seeking Jobs, Excitement
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