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India Passenger Cars
Turbocharged
With the widening price gap between diesel and petrol fuels, the passenger car
industry in India is rapidly migrating towards diesel cars. Currently, diesel
accounts for c.30% of the car sales and as per several OEM’s, is likely to rise to
50% within the next 3-4 years. While Maruti's overall market share is c.45%, it
has lower share in the diesel segment, given its limited product presence. We reiterate
our view that competitive intensity is rising in the passenger car segment
and are neutral on the stock.
Diesel is growing at 1.5x the industry growth rate: As the price gap between
gasoline and diesel fuels has widened to c.35% and that diesel vehicles are c.30-
40% more fuel efficient, consumers are rapidly shifting to diesel variants. This
trend is increasingly evident as diesel now accounts for c.30% of the industry
car sales (up from 10% earlier) and could potentially rise to 50% of the sales in
the next 3-4 years.
Global OEM's are aggressively targeting this space, while Maruti lacks a
broad based product portfolio: Global OEM’s are targeting this segment by
offering diesel products that are present across segments i.e. GM Beat 'Diesel',
Ford Figo, VW Polo, etc. However, the industry leader Maruti Suzuki is present
in the premium hatchback range.
As global OEM’s localize engine production in India, their product
offerings are 10-20% cheaper than the market leader: Global OEM’s have
set up / are expanding their diesel power train manufacturing facilities in India
(which has lowered production costs). This has enabled these OEM's to offer
products that are 10-20% cheaper than that of the industry leader.
Europe has seen a similar transition - the rising shift towards diesel cars has
already been witnessed in the European countries, where the pricing differential
(diesel is c.20% cheaper than gasoline) between the two fuels has driven the
shift. Thus, diesel now constitutes c.50% of the market (up from c.10% in the
early nineties).
Key Risks: While growth in diesel sales is likely to be robust, a move towards
de-regulating diesel (like petrol) would significantly reduce the diesel price
advantage. The government could also consider additional taxes on diesel
vehicles (given the high subsidies on diesel fuel).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Passenger Cars
Turbocharged
With the widening price gap between diesel and petrol fuels, the passenger car
industry in India is rapidly migrating towards diesel cars. Currently, diesel
accounts for c.30% of the car sales and as per several OEM’s, is likely to rise to
50% within the next 3-4 years. While Maruti's overall market share is c.45%, it
has lower share in the diesel segment, given its limited product presence. We reiterate
our view that competitive intensity is rising in the passenger car segment
and are neutral on the stock.
Diesel is growing at 1.5x the industry growth rate: As the price gap between
gasoline and diesel fuels has widened to c.35% and that diesel vehicles are c.30-
40% more fuel efficient, consumers are rapidly shifting to diesel variants. This
trend is increasingly evident as diesel now accounts for c.30% of the industry
car sales (up from 10% earlier) and could potentially rise to 50% of the sales in
the next 3-4 years.
Global OEM's are aggressively targeting this space, while Maruti lacks a
broad based product portfolio: Global OEM’s are targeting this segment by
offering diesel products that are present across segments i.e. GM Beat 'Diesel',
Ford Figo, VW Polo, etc. However, the industry leader Maruti Suzuki is present
in the premium hatchback range.
As global OEM’s localize engine production in India, their product
offerings are 10-20% cheaper than the market leader: Global OEM’s have
set up / are expanding their diesel power train manufacturing facilities in India
(which has lowered production costs). This has enabled these OEM's to offer
products that are 10-20% cheaper than that of the industry leader.
Europe has seen a similar transition - the rising shift towards diesel cars has
already been witnessed in the European countries, where the pricing differential
(diesel is c.20% cheaper than gasoline) between the two fuels has driven the
shift. Thus, diesel now constitutes c.50% of the market (up from c.10% in the
early nineties).
Key Risks: While growth in diesel sales is likely to be robust, a move towards
de-regulating diesel (like petrol) would significantly reduce the diesel price
advantage. The government could also consider additional taxes on diesel
vehicles (given the high subsidies on diesel fuel).
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