Wednesday, October 31, 2007

Oil Passes $96 a Barrel

The price of a barrel of oil passed $96 this evening.

The head of the International Energy Agency has warned that the world's economy is in danger of being slowed by such high prices. Growth in India and China is of course helping to drive up prices. I wonder how much effect the 1-Lakh car will have, once it gets rolled out?


DarkStorm said...

Hey San,
it might actually just work. Say I have Rs 5 lakh to spend. I buy a car for Rs 4 lakh and the other one lakh is spent on fuel for two years (considering 50,000 pa for petrol, a little less than 5000 pm. )

Now, if I buy a cheaper car, for Rs 1 lakh (or 1.5 lakh actually when it rolls out, 1 lakh seems to be a hype tactic), I have 3.5 lakhs remaining.

Even if the mileage of the cheaper 1 lakh car is half of the feature-rich 4 lakh one, I can fuel my 1 lakh car for approximately 3 years, and still be in profit.

Also note,
- half mileage is the worst case scenario I can think of. The lighter weight of the 1lakh car means it will offset the loss of mileage due to low tech engine.

- The 3.5 lakh that I have in hand is an extra "soothing" factor.

- Even if fuel costs rise to Rs 80 a liter in India from the current 45-50, the 1 lakh car would be a better option at half mileage due to the money-in-hand factor.

Finally, the cost would not matter at all if there is no value for money... I hope Tata and Bajaj know what they are doing.

Though I still wonder what VFM will a 1 lakh car provide. Where will they cut costs? Removing the air conditioner? Maybe make it a 2 seater, smaller cabin and hence smaller AC. No power windows or steering. No plush interiors.

Definitely, I would never buy a car without AC (given how hot a car gets inside in these days of global warming).

sands said...

hey guyz this one lakh car thing is getting bit out of hand and BTW i think ratan tata has clarified that one lakh does not mean "one lakh" it could be one lakh and some thing like 1,60,000 or 1,80,000 also so lets wait but yeah am bangalorean and going to office everday i always wonder what will happen to traffice in this city whwn the one lakh car comes

san said...

sands, I would say that with the rising value of the Indian rupee, this could have an effect on reducing the price. So perhaps the 1-lakh target may not be so unrealistic, as the rupee continues its rise.