CNG Vs Petrol Bike: Switch Can Help Save Rs 36,000 Despite Recent Hike
The two-wheeler space has been ripe with innovations in in the last two-three years with the evolution of electric scooters and bikes. While the launch of electric motorcycles is awaited, with Bajaj Auto announcing the Freedom 125, a calculation by NDTV Profit estimates that one can save almost Rs 36000 by making a switch from traditional petrol motorcycles despite the recent price hikes in CNG prices.
As an example, we compare the Bajaj Freedom 125 CNG and the Hero Splendor 125.
First, Why Have CNG Prices Been Hiked?
City gas distributors like IGL, MGL, Gujarat Gas used to source cheaper gas from the government thanks to the Administrative Price Mechanism or APM. City gas companies mainly get domestic gas allocation at a fixed price of $6.5 per million metric British thermal unit for their CNG sales volume requirements. Reduced allocation of domestic gas has a negative impact on the companies' profitability and thus stock prices of city gas distribution companies have seen a 10-25% hit in trade.
The Case To Switch To A CNG Bike
While one acknowledges the reduction in APM gas allocation to city gas distribution companies will lead to them eventually raising prices, looking at multiple factors like petrol cost, average mileage and maintenance cost, switching to a CNG bike from a traditional petrol bike will still lead to savings of Rs. 36,000. See the table below.
The total cost of ownership of a vehicle over 60,000 km for a CNG bike like Bajaj Freedom will amount to Rs. 189,327. In comparison we have taken the Hero Super Splendor, where the same calculation comes to Rs. 226,192. This leads to savings of roughly Rs. 36,865.
It is noteworthy that these savings are assumed at CNG gas price at Rs. 84 per kg. Currently the CNG prices are different in cities with prices in Mumbai at Rs. 77 per kg.
In other words, the total cost of CNG bike ownership at Rs. 75 per kg came at Rs. 184,961 and even if the CNG price went as high as Rs. 84 per kg, one would lead to savings compared to petrol bike.
Going Forward: The Road Ahead
Bajaj Auto is currently the only player in the CNG Bike space with the Freedom 125. The company had mentioned they were expecting sales of 18,000 units Freedom 125 in October versus 10,000 units in September. They are also ramping up production to 30,000 units per month in Q3FY25 and looking to subsequently increase production to 40,000 units per month in Q4FY25.
Additionally, TVS Motors in its second quarter conference call when asked about their CNG two-wheeler plans, mentioned that they are already in 3-wheeler CNG segment and are closely looking at how customers respond to this new category.
