The Equation Between Petrol and Pollution

As petrol prices go up, more buyers are opting for diesel cars which run on low costs but also result in more pollution

Published: May 6, 2013

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With the increasing prices of petrol, you would not be wrong to expect car buyers to prefer smaller, more fuel efficient cars. However, car sales data shows that instead of opting for more fuel efficient variants, buyers are going for diesel models that cost and pollute more, but have lower running costs. The price of diesel, subsidised by the government, is about 20 percent lower than petrol.    

The data shows more people are opting for diesel-guzzling (and, therefore, more polluting) SUVs, rather than petrol-efficient small or compact cars. Diesel SUVs, on an average, consume 67 percent more fuel when compared to a small, petrol car. Even within the compact car segment, more people are opting for diesel variants, which generally cost Rs 1 lakh more.

(This story appears in the 17 May, 2013 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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  • Deepak Sharma

    The article also seems to discount the economic costs of externalities i.e. pollution which is not considered by the buyers of both petrol and diesel cars. It is about time we start including such externalities in car costs.

    on May 9, 2013
    • Shravan

      Deepak, you raise a very good point. That was exactly what I was getting at when I said \"Diesel SUVs, on an average, consume 67 percent more fuel when compared to a small, petrol car.\" The environment is the loser!

      on May 9, 2013
  • Mayank Roy

    The base on which the whole article stands, i.e. the operational cost of an SUV is lesser than the small-segment cars, itself is wrong. It is pure mathematics. Assuming that the petrol rate is Rs.70; so the Diesel rate is 20% lesser than the petrol rate (as mentioned in the above article) which equates to Rs.56. Operational cost= fuel rate/Mileage. Taking the above mentioned mileage values, we get that operational cost of small-segment petrol car equal to 70/15= Rs.4.67 per Km ; while in case of Diesel SUV, it is 56/9= Rs.6.22 per Km. So the operational cost of an average Diesel SUV is more than that of a small-segment petrol car. The difference in sales of both the segments can be mainly attributed to the diversity of buyers approaching them. The SUVs generally cost 10 lakh rupees. The major chunk of buyers approaching this segment are the rich and upper-middle class for whom the mild fluctuations in the Diesel rate are hardly any headache. And thats why, the SUV segment has consistently maintained a positive growth (not being company specific). In contrast to that, the major buyer of small-segment cars is the middle class for whom the fluctuations (which are generally not mild as compared to Diesel) can almost overturn their monthly budget plans.

    on May 6, 2013
    • Shravan

      Mayank, thanks for your comment! Very insightful! However, I don\'t think that the base on which the article stands is the operational cost of SUVs. The article looks at the knock on effects of fuel price change. You raise a very good point about buyers that perhaps should have been made clearer: it is not that small car buyers are moving to SUVs. The buyer profiles are totally different and the opportunity costs that face differ too.

      on May 9, 2013
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