[Delta Wing]

Guys, I've got some data about fuel prices and have validated the assumptions to a more realistic estimate. I was reluctant to comment on the break even period till now but with the historical trend, I think comments can be made.

I found the information on fuel prices here:

TABLE-Fuel prices in India's capital since 2000 | Reuters

The above link gives the prices from 2000 to 2011.

Also:

TABLE-India's petrol, diesel, kerosene and LPG prices | Reuters

This link gives the trend from 1989 to 2009.

Just in case the links are lost in time, I'm attaching the data in documeted form here:

Fuel Prices in India 1989 to 2011.docx


First, the Annual trend of fuel prices in India over the last decade from 2000 to 2011 is as follows (based on fuel prices of above links):



So my earlier assumption of 10% hike would have been correct had there not been two corrections in prices between 2001 and 2009. However, I now realise that the government is perhaps trying to keep the prices in step with an inflation of 8%. Based on the historical facts, I projected an 8% price hike and reworked the Excel sheet.

First, let's take a look at what the break even has been like over the last decade. I just input raw data of fuel prices from 2000 to 2011 and then filled 8% growth of price till 2015. The results are here (click to see readable figures):



Then, as brought out by our friend dot, it may not happen that fuel prices keep inflating perpetually due to crude futures' impact on the dollar. If the global crude were to be kept stabilised at the current rates, even then the prices would still inflate at around 8% inflation owing to Indian economy (the government may pit the oil companies to manage the prices within the range of inflation and growth rates). I think that this would give a way for the government to reduce diesel subsidies gradually (more on this later). I really don't think crude will remain stable over protracted durations what with political unrests in the middle easts every now and then (some projections stating the crude to reach 200 or even 300 $/barrel if Saudi erupts in turmoil). but like the facts of last decade demand, here is the sheet for a hike at 8%:



If the above figures of 8% hike seem too much, I also put in a sheet with a projected price hike of only 4% per year. It should make a lot of difference, no? It doesn't. Even with a reduced hike per year, the break even just gets pushed away by a maximum of one year. This is because the difference in petrol and diesel is too enormous already. See here:



Some observations can now be confidently made. What our skeptical friends have claimed to know all along, is shown in the historical break even period of ~8 yrs (C+ Segment) and ~10-11 yrs (C Segment). That's the basis. And that is not what this whole exercise was about. It was about the sheer extent of reduction of break even periods with the present divide in petrol/diesel prices. As can be seen, the break even has come down to 3-3.5 yrs (C+ Segment) and more importantly, 4-5 yrs (C Segment). And this is with a running of 8 K km/yr. If the mileage is more, it comes in even earlier. What this means is that even consideration of interest on money saved, along with the interest on it, on initial purchase of petrol over diesel, would get overwhelmed by such a reduction of break even periods.

Factoring in actual figures of initial purchase, interests saved, loans and EMIs, interest on running costs saved, all this would vary wildly from car to car model and from person to person. The excel calculator can be used for specific requirements but a general 'one size fits all' type of formula cannot be put in here.

Getting back to diesel deregulation, I think the government will have to get serious about diesel deregulation in about 2-3 years from now, at least partially. And that would be because it would become an issue impossible to put off by then. I really don't know how it's going to happen but with deregulation of petrol, the signs are already up.

Cheers.

[asr245]

DW,

You have put in a lot of effort on this. Great work

Getting back to the thread, with further increase in price difference, diesel car sales are only going to rise which will lead to further increase in subsidy costs. Considering the quality of diesel sold in India, environmentalists are also going to join the war against diesel. Aam aadmi still rides on 2 wheels where there's no diesel option. Surmounting pressure will cause the government to deregulate sooner than later or increase tax on diesel cars to negate subsidy on fuel. Either way, as of today, party belongs to the diesel camp. For how long, my guess would be not very long.

If I was in the oil ministry, my immediate step would be to try and create an artificial shortage of diesel in major metros especially those who have public transportation on CNG. Or maybe allow diesel pumping only between 9am-5pm. Well, you get the drift. Might just put off people to buy diesels.

[Gooney]

Kudos DW! It is always good to back up common sense / general knowledge by hard facts. And trust me your work is much appreciated.

I know similar threads exists, let the mods merge it then. The diesel-petrol car ownership comparo has been done to death, but please do not discourage noble efforts like these. I know some of you are old-timers and, in your infinite wisdom see through everything that there is to be seen through in the auto world, however it is not fair to write off such earnest efforts this way.

[Delta Wing]

Originally Posted by Fordmanchau

...A calculation just on the basis of fuel price differences can be misguiding.
I'm not saying that buyers should base their decisions solely on fuel costs, it never is one reason by itself. But I made the calculator with the specific purpose of comparing running costs, especially in the present scenario.

True, interest also applies to the savings, but then if you intend to go such deep into your study, then you might also consider the interest foregone on the price difference that you paid up, along with the extra interest burden. And there you would realise, how complicated it would get.
I think I answered this in my previous post.

Okay, now if government wouldn't do it, then who would. I am quoting from the link I have given above in my post.
The government may be vested with the power of deregulation but can it exercise it? That was what I meant. And yes, I do agree that deregulation has to come sooner than later.

Originally Posted by phamilyman

I am still lost about this whole hype of the awesome work by DW - its nice no doubt, the scenarios are interesting. But its long known - diesel has lower taxes even if deregulated, and is more efficient (mileage). Thats why the scenarios show what they do - There I told it in one line

But folks, wake up - its an old discussion, same old calculations:
http://www.team-bhp.com/forum/indian...vs-diesel.html (2008)
http://www.team-bhp.com/forum/indian...tml#post362920 (Jan 2007) - very decent and detailed calculation.

The data is all out there for donkey's years. I refuse to understand the wows and the eurekas. Or is it that people are not searching hard enough of late?
I had read the threads you posted way back and knew that they don't give an instant reckoner for a comparison between two sets of two cars. As I brought out earlier, the calculator is not only for diesel/petrol cars, you can pretty much compare a car with a truck if you wanted. It's just simple arithmetic which makes one step easy in knowing what your vehicle will cost to run. It may be useful for some people and that's that. No hype made and none required. Leave the comparisons. The calculator can help you in planning the budget for your existing car as well. It's not about reinventing the wheel but to see what makes it turn smoother. And we are waiting for your calculations to support your claim of a rental plan being cheaper than buying a car for mileage under 12 K km/yr.

Replies in bold above. Thanks.

[phamilyman]

LOL, DW - Firstly, I don't have that much free time on my hand. Kudos to you for channelising your free time productively.

Secondly, the wheels don't turn any smoother - IMNSHO, you can draw the same conclusions from the previous excel sheet.

Lastly, as for scenarios - I make a living selling exhaustive scenario planning. Let me just say that while this is all nice historical data and interesting, its not something I'd use for a car purchase decision - I already have my rules of thumb, thank you.

Though yes - as promised, I'll get into office on Monday and should be able to hunt down a couple of people who come by sharing cab (self, not corporate) and will draw up an estimate versus the cost of ownership of a car.

[synchromesh]

Thanks Delta wing,for the elaborate spread sheet.

A couple of thoughts on the computation:
1. In the last 2 yrs, the cost of petrol has risen by ~55% (thanks to deregulation, middle east crisis, etc). Though not definitely a good thumb rule, if you were to consider this number instead of an annual 10% hike, the end result would be a clear & conclusive evidence on why diesels would be preferred.
2. Another point to bolster your case: In case our Govt decides to continue to subsidize diesel fuel (owing to numerous reasons), then in order to segregate the rightful subsidy owners, additional taxes may be levied during the time of purchase itself.
For the sake of argument, if we assume this additional levy to be about 5-8%, the savings are still evident in the long run (only the break even is pushed farther).

To reiterate- In India, diesels are the way forward!

[xander]

Ok. So now we have a clear answer that diesel is the engine type to go for if buying a new car and planning to run it around 16K a year.

Now for the next question: Will it make sense to sell your current petrol car and get a new diesel car to save on fuel expense?

In my case, I run my 4.5 year old Santro around 1300Kms a month which translates to approx Rs 7000 a month in petrol expenses. If I were to sell it and buy a Figo/Swift diesel, the fuel expense would come down to around Rs 4000.

But the EMI I would have to pay for a new Figo would be approx Rs 9000. (I can pay the down payment by selling the current car for which the loan tenure is over)

So total expense = 9000 + 4000 = Rs 13000/-

I guess I can live with my petrol car until it refuses to run anymore!

[ACM]

Delta this is a superb effort.

Infact the extent of detail that you have gone to is unbelievable.

Diesel cars today are within 10% of the cost of the petrol variant, with 20% greater fuel effeciency and 2/3rd the cost of fuel.

Payback is real fast and at times done and over with in less than a year.

Besides a lot of the diesels (with high torque) are a lot more fun to drive than the petrol variants.

[Fordmanchau]

DW, you can look at this link.
ET does the same comparison as you have done.

How you can reduce the strain on your budget caused by the recent petrol price hike - The Economic Times

Posting this for general info. Might help clear the doubts of others.

[r_devakumar]

Originally Posted by avisidhu

Another X factor that works in favor of Diesel vehicles: that sinking feeling you get every time you get petrol filled, knowing that the same amount of diesel would have cost half the amount, and would have driven more KM's as well !!
And yes, Diesel actually costs half the amount, in Punjab at least(Rs 36 vs Rs 70).

Shelling out an additional 70-80K in the start is comparatively less painful, IMO

I agree with this view. Another place which is similar to this is the home loan interest, fixed vs floating. I am more comfortable going with fixed rate than the floating rate. Gives predictability and peace of mind.

[Delta Wing]

Originally Posted by xander

Ok. So now we have a clear answer that diesel is the engine type to go for if buying a new car and planning to run it around 16K a year.

Now for the next question: Will it make sense to sell your current petrol car and get a new diesel car to save on fuel expense?

In my case, I run my 4.5 year old Santro around 1300Kms a month which translates to approx Rs 7000 a month in petrol expenses. If I were to sell it and buy a Figo/Swift diesel, the fuel expense would come down to around Rs 4000.

But the EMI I would have to pay for a new Figo would be approx Rs 9000. (I can pay the down payment by selling the current car for which the loan tenure is over)

So total expense = 9000 + 4000 = Rs 13000/-

I guess I can live with my petrol car until it refuses to run anymore!

Thanks for bringing this up. If you sold your car and bought a new diesel hatch:-
For the EMI you're paying extra, you're also getting a brand new car right now, perhaps with more new features, instead of the existing 4.5 year old car. This car will cost you less to maintain and will be in warranty for some more years while for your old car, you'll be running major expenses soon within 2 odd years. And after 5 years, your Santro would have been 9.5 years old (perhaps discontinued) and the Figo only 5 years old improving the resale value substantially. So I think it would still be beneficial in the long run. And even though you might have enjoyed your Santro immensely, isn't the new Figo going to give you much more fun to drive too?

Originally Posted by ACM

...
Payback is real fast and at times done and over with in less than a year.
Besides a lot of the diesels (with high torque) are a lot more fun to drive than the petrol variants.

You can say that again.
While it might be true that a high revving petrol may be more fun to drive when near redline, it is also true that diesels giving high torque at regular-use-revs are fun to drive most of the time.

[xander]

Originally Posted by Delta Wing

Thanks for bringing this up. If you sold your car and bought a new diesel hatch:-
For the EMI you're paying extra, you're also getting a brand new car right now, perhaps with more new features, instead of the existing 4.5 year old car.

Yes. I agree with that fact. For the money I am spending extra, there is the additional value of getting a new and better car.

But again, this is a philosophical subject. Even if I buy a merc, I will be paying extra and getting a much much better car.

Or I can ask myself, if I am so concerned about my spending, why I got the santro in the first place? I could have sticked to a motorcycle and saved a lot of money by this time.

But that **** ain't true either.

The truth is, if you are having an old car and you are getting sufficient extra money to shell out each month, you are ready to upgrade to a newer car and when you eventually get to that point, buying a diesel is the smarter choice.

the Figo only 5 years old improving the resale value substantially

The higher resale value will be because of the higher price I have paid. The depreciation rate will be maximum in the first 3 years of a car. My Santro has already taken the initial depreciation hit. Over the coming years, the further depreciation will be minimal.

[mayankjha1806]

Originally Posted by Fordmanchau

DW, you can look at this link.
ET does the same comparison as you have done.
Attachment 550056
How you can reduce the strain on your budget caused by the recent petrol price hike - The Economic Times

Posting this for general info. Might help clear the doubts of others.

I liked this man, thank you. So i was right as per my calculation my break-even will be closer to 5 years and hence if its a car that i want to buy it can be petrol.

[vmedury]

I did similar calculation (not this colorful or detailed) last year when I bought a diesel vehicle.

I was trying to factor the interest cost on the 1lakh extra I would need to pay for the diesel.
But the price difference between the fuels and my daily office run showed that I could recover the extra cost in about 1.8 year of usage.

Also diesel being the fuel used by transport any hike in its price will have a direct impact on everything else (inflation). So the difference will continue , I don't see the price of Diesel coming close to petrol.

Some additional points in favour of the oil burners.

1)Also the factors like better mileage and the lower cost per km lead me to get on to the highways ... (priceless).

2)The current day diesels offer very good drive ability in terms of torque and being silent (well almost).

3) I was advised that the diesel offer better resale value .

4) Many cars now offer 2-3 years of warranty , which is definitely > the break even point.

My suggestion pick an oil burner for your daily run and if your budget permits a petrol hatch back for some fun once in a while. I am still holding on to the petrol hatch back for this purpose.

[el lobo 6061]

Let me put forth my point and its a brain teaser.
I purchased a VW Vento TDi Highline costing Rs. 9,13,000 Ex-Showroom Vashi, Navi Mumbai on 4 Apr 2011. I had booked my car on 25 Dec 2010. In Dec 2010, Honda City V MT cost was 9,13,000. So the difference between the two cars diesel and petrol is a big 0. So I didn't pay any premium for diesel car. So every kilometer I drive, I save money. When I was out in market I wan keen on purchasing Honda City V MT as it was the best, but VW made the cut and it has a oil burner under the hood for the same price. What do fellow Bhpians have to say?
Another point I would say is that if someone is on a lookout for a car in 9-10 lac budget the best petrol car is Honda City V MT Exclusive and diesel would be none other than current C-Segment leader VW Vento TDi with a superb torque engine.