Rising Diesel Prices Hit SIV Sales

Rising Diesel Prices Hit SUV Sales
2008/05/13 By Yun, Dae-won
Rising diesel prices now affect the sales of sports utility vehicles. Despite the heavy financial burden in purchasing, SUVs were able to maintain its popularity among drivers. However, the diesel prices reaching to KRW 1,686.53 per liter finally made drivers lose their appetite. Car makers are trying to present various incentives to revive drivers’ appetite. And, they are trying to push the government to maintain the gap between the gasoline prices and the diesel prices. On May 8, the Korea Automobile Manufacturers Association (KAMA) said that the sales of SUVs reduced by 18.2% from a year earlier. In the first quarter of this year, the sales increased by 6.4% year on year. But, it drastically fell down only in a month. The sales of Santafe FE, the most popular SUV made by Hyundai Motor Company, decreased by 14.8% from a month earlier in April. Ssangyong Motor’s Managing Director Lee Kyo-hyun said, “As we worried, the rising diesel prices are hitting the sales. Makers are coming up with various incentives to promote the sales." Also, makers are demanding the government to maintain its ratio of diesel to gasoline in prices, 85: 100, what it had implemented in July, last year. Currently, the diesel prices are reaching to 94 to 95% of gasoline prices. A source in the industry said, “Due to the higher taxation as well as the rising diesel prices, the ratio of diesel and gasoline in prices has been disrupted. That may cause heavy burden on the budget of SUV drivers for job.” But, the Ministry of Strategy and Finance seems unlikely. Yoon Jung-sik, an official of the Ministry of Strategy and Finance, said, “The ratio of diesel to gasoline in prices was a temporary policy considering the situation. We never plan to manipulate the market in order to keep the ratio.” Car makers insist that the Environmental Cost Act established in 1991 is out of date since new diesel engine vehicles are emitting less carbon dioxide than gasoline engines. They plan to present various incentives to consumers to promote the sales. Ssangyong Motor began to provide a KRW 1 to 2 million’s worth of cash benefit to those consumers purchasing SUVs and RVs.