Auto News

Increase in demand for diesel cars with rising petrol prices

By Motortrend India Staff   |   25 September,2011

Used diesel cars are defying conventional wisdom and appreciating with age, with prices revving up nearly 12 percent over the past six months. This has happened as the gap between petrol and diesel prices has widened, fuelling demand and increasing waiting time for the bestselling diesel cars. Following a flurry of price revisions, petrol is now more than Rs 25 a litre costlier than diesel.

The used-car market in the country is 1.1 times the new car market, at about 2.5 million cars a year and it is growing at 15-20 percent per annum. The organised sector comprises just about 12 percent of this market while brokers account for around 30 percent and the large majority of deals are struck directly between the consumers.

Prices of diesel-driven Suzuki Swift, Swift Dzire, Mahindra Logan and Ford Fiesta have risen 10 percent to 15 percent in the second-hand market. At the same time, prices of used petrol cars have fallen up to 20 percent, especially in the case of sedans such as Honda Civic and Hyundai Sonata, and SUVs such as Honda CRV and Mitsubishi Outlander.

Experts say that the prices of used diesel cars are rising also because of a paucity of supply in the market, even as demand is on the rise. Moreover, interest rates for used cars have remained stable at around 18 percent, while rates for new cars have risen by 3 to 4 percent at around 13 percent.

The increasing thirst for cars that drink the heavier fuel has led Fazulbhoys Motors, one of the oldest used-car companies in Mumbai, to reorient its inventory to source more diesel cars. “We are looking at stocking more and more diesel cars,” says Arif Fazulbhoys, director, Fazulbhoys Motors.

“The demand for diesel cars has become pronounced especially after the petrol price hike in March.” Fazulbhoys says the prices of diesel cars, especially those of Swift and Swift Dzire, have risen 10 percent to 20 percent over the last three to four months.

Since the beginning of this year, he says, sales of diesel cars at his company have grown 50 percent while those of petrol cars have slumped 20 percent. Shubhabrata Saha, CEO of Mahindra First Choice, the pre-owned dealer network which has a presence across 70 cities, says enquiries for diesel cars have risen from 25 to 40 percent, while the share of petrol cars has fallen from 75 to 50 percent, and CNG accounts for the rest 10 percent.

With fewer people venturing out to buy new vehicles, companies are reporting a slowdown in the growth of their used-car businesses. The growth rate has dropped from 35-40 percent to 15-20 percent at Maruti True Value, the used-car dealer network run by country's biggest carmaker Maruti Suzuki.

Related Content