Impact of petrol price hike and plunging dollar on Indian Auto Industry

The petrol prices have been jacked up by Rs 7.50 per litre, owing to the falling in rupee against the US dollar. Unfortunately, we were not the first ones to rush and tank-up our cars, so were stuck in the queue for quite some time – giving ourselves ample time to think about its implications on the Indian auto industry. This didn’t end there and now there are few more things to consider as US dollar now costs well over Rs 56 and there are speculations that it soon cost Rs 57 or may even Rs 58. 

As a country we import more than we export – so in simple words that means we will have to pay more for everything that needs to be imported. Similarly, rising petrol costs not only mean additional pinch to petrol cars owners, but to everyone including two-wheeler owners and people who travel by rickshaw. In a country of over a billion people, you can be certain that even this number is bound to be very high and thus it is another burden on the common man who is already reeling under inflation.

But probably the impact on the auto industry is much worse than what will be visible on other sectors.  Frankly, from what we see, the Indian auto industry is almost on the verge of a crisis. The entire last fiscal has not been encouraging - barring last quarter of 2011-12, which just about managed to negate the impact of the previous three quarters. So, the current double blow might cost a lot more than just a temporary drop in numbers. Of course, there will be steps taken to correct the situation by both, OEMs and the government and we can also expect some positive outcomes from the current situation.

These are the expected outcomes of the price hike and rupee fall on the Auto Industry.