Rising fuel prices impacting demand for entry-level vehicles; customers delay purchases

Increasing prices of petrol have been impacting demand for entry-level vehicles. Almost 60 percent of the two-wheeler volume comes under the entry-level segment and the continuous rise in fuel prices delays purchase decision by approximately by a month, suggest experts.

Now, as automakers are set for another round of price hike in Q2 to offset rising input cost, in an interview with CNBC-TV18, Nikunj Sanghi, chairman of Automotive Skills Development Council (ASDC) and Vinkesh Gulati, president of Federation of Automobile Dealers Association (FADA) discussed the impact rising prices can have on-demand.

Gulati said, "Overall, the two-wheeler segment is not in a good shape because the highest percentage of the sale which comes from entry-level is not back and the increasing petrol price, which is around Rs 100 per litre, also affects because entry-level purchases are based on need base. So maybe fuel price level at Rs 100/litre makes one wait and it delays the purchase."

Meanwhile, Sanghi said, "The stress in the two-wheelers continues and two-wheeler industry which would normally contribute to almost 80 percent of total registrations, but when I see the June (as against last year) figures, it has come down to 75 percent of the total registration."

According to him, affordability becomes a big question in purchasing vehicles. "When we are talking about entry-level two-wheelers or cars, affordability becomes a big question when it comes to making a purchase decision and these are the people who are impacted the most by the second wave of COVID. Therefore, the sentiment is poor, they have spent a lot on healthcare and if they cannot afford to buy a vehicle or even operate a vehicle then both the price increase in the cost of acquisition and price increase in the cost of fuel both are going to impact demand," said Sanghi.

He added that sports utility vehicles (SUVs) will continue to see growth as customers of this segment do not have affordability issues.

Watch the video to know more.