Rising fuel prices a bummer for carmakers

Despite sales being upended by the coronavirus pandemic and battling dampened consumer sentiments, carmakers are slowly getting back on track. Domestic sales volumes rose 48% in July compared to same month last year.

But if fuel prices continue to be sold above Rs 100/litre and rise even further going ahead, optimism will soon peter out.

Pent-up demand, increasing customer preference towards personal mobility and a good demand from non-urban markets were the major factors behind this good performance.

While the second wave of coronavirus had a bigger impact on citizens, carmakers are betting on a quicker turnaround this time as citizens explore personal mobility options amid the virus threat.

Offices and vacation destinations reopening will also play a major part in the auto industry’s recovery to pre-Covid levels.

Maruti Suzuki, the country’s largest carmaker, believes that car sales can improve further if a third wave is averted.

According to RC Bhargava, Chairman, Maruti Suzuki, the performance in the next three quarters will largely depend on how effectively people get vaccinated and observe safety protocols.

The spurt in car sales also reflects that rising fuel prices are are not necessarily a deterrent for those looking to upgrade their cars.

But if fuel prices continue to go northwards, it will impact the carmakers at some point and optimism will soon peter out.

The encouraging sales numbers is good news for the industry but it it remains to be seen if the growth momentum can be sustained.

Carmakers will hope new launches will help drive some excitement among buyers and premium segment cars retain consumer-pulling power.

At a crossroads now, a lot hinges on how consumers choose to balance their aspirations and needs. Fortunately or unfortunately, the fortunes of carmakers are heavily dependent on that choice.