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India Autos
Fuel Price Hike - further cost push for consumers
• Petrol Price hiked by 8%: Post the recent state elections, oil marketing
companies in India increased retail petrol prices by Rs 5/ltr (~8%) to
pass on the under recoveries to consumers. Fuel expenses typically
account for c.25-30% of the monthly running costs for passenger cars / two
wheelers and c.50-55% for commercial vehicles. Diesel Price hike also
likely: While gasoline prices have been deregulated by the government,
diesel prices have not been raised (given political sensitivities). A group
of empowered ministers is expected to meet later this week to decide on
a price hike in diesel, (prices were last raised in Jun’10). Our JPM India
Oil & Gas team would view an 8-10% (Rs4/ltr) diesel price hike as
positive from a reforms perspective.
• Fuel Price hikes due to fiscal compulsions: J.P. Morgan Oil and Gas
team estimates that the recent hike is still Rs 3/ltr (~5%) lower than what
was required to make domestic prices at par with international prices.
They believe that another hike may be required to benchmark retail
prices to the prevailing international crude prices.
• Sector View: While auto sales are moderating - After robust growth
(CAGR of 25% over FY09-11), car sales growth has moderated to c.15%
yoy in April. (see figure 1). The management of Maruti Suzuki in their 4Q
results call highlighted that footfalls at dealerships are lower (as compared to
Dec'10 quarter). …. Further cost push ahead: Over the past year, monthly
running expenses for automobiles have risen by c.17-20% (Indian Autos:
Getting Pricey). We believe that consumer sentiment will be further
impacted, post the price hikes. Our India Strategy Team has an UW
stance on the sector.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Autos
Fuel Price Hike - further cost push for consumers
• Petrol Price hiked by 8%: Post the recent state elections, oil marketing
companies in India increased retail petrol prices by Rs 5/ltr (~8%) to
pass on the under recoveries to consumers. Fuel expenses typically
account for c.25-30% of the monthly running costs for passenger cars / two
wheelers and c.50-55% for commercial vehicles. Diesel Price hike also
likely: While gasoline prices have been deregulated by the government,
diesel prices have not been raised (given political sensitivities). A group
of empowered ministers is expected to meet later this week to decide on
a price hike in diesel, (prices were last raised in Jun’10). Our JPM India
Oil & Gas team would view an 8-10% (Rs4/ltr) diesel price hike as
positive from a reforms perspective.
• Fuel Price hikes due to fiscal compulsions: J.P. Morgan Oil and Gas
team estimates that the recent hike is still Rs 3/ltr (~5%) lower than what
was required to make domestic prices at par with international prices.
They believe that another hike may be required to benchmark retail
prices to the prevailing international crude prices.
• Sector View: While auto sales are moderating - After robust growth
(CAGR of 25% over FY09-11), car sales growth has moderated to c.15%
yoy in April. (see figure 1). The management of Maruti Suzuki in their 4Q
results call highlighted that footfalls at dealerships are lower (as compared to
Dec'10 quarter). …. Further cost push ahead: Over the past year, monthly
running expenses for automobiles have risen by c.17-20% (Indian Autos:
Getting Pricey). We believe that consumer sentiment will be further
impacted, post the price hikes. Our India Strategy Team has an UW
stance on the sector.
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