Focus Now More on Petrol-Fuelled Vehicles as Diesel Loses Advantage
Many cos are cutting production of diesel-powered engines, launching petrol versions
Maruti Suzuki recently said it would stop producing the diesel-powered version of the Celerio small car.
The announcement from the nation’s largest carmaker was hardly a surprise as buyers of small cars no longer consider the diesel option as favourably as before.
But what is interesting is the increasing demand for the petrol option in larger vehicles as well, driven in part by diesel’s dented image as a more harmful polluter. This shift is expected to gain further pace as new emission rules, which are scheduled to be implemented in three years, will increase the price of diesel cars unevenly compared with petrol-powered options, said industry experts.
Today , just one in five popular compact cars -such as the Baleno, Grand i10 and Tata Tiago -sold in the local market comes fitted with a diesel engine. In overall cars sales, the share of diesel has shrunk to 27% in the April-September period of 2016 from 47% four years earlier.
Petrol is making deeper inroads also into the utility vehicles space, where diesel has always been the preferred choice because of the higher fuel efficiency and torque. Just 3% of UV buyers opted for petrol in 2012-13. Now it is 16%.
Big utility vehicles like the Toyota Innova and Fortuner, which were available only in the diesel avatar, now come also with a petrol engine option. Meanwhile, Jeep is planning to drive in a petrol-powered Wrangler to India.
While these may be seen as a welcome sign by detractors of diesel, automakers are sitting on under-utilised diesel capacities they developed two-three years back, when having that fuel option in the product portfolio was essential for success in the Indian market.
Diesel has been a highly preferred choice for compact car buyers till about two years ago, when the fuel was heavily discounted through government subsidies.But since it was deregulated, the price difference between petrol and diesel narrowed. As diesel-powered cars cost more to purchase, and the small difference in the price of the two fuels and the better fuel efficiency of diesel aren’t enough to offset that quickly, people again started opting for petrol.
In 2014 the price differential between diesel and petrol was about ` . 20 per litre which has come down to about ` . 10.
“In terms of a typical compact segment car, the fuel cost forms the second biggest component after EMI … The breakeven mileage level has increased (with higher fuel price), making the diesel car not a lucrative option for customers whose annual driving is less than 10,000 km,“ said Subrata Ray, senior group vice president at ratings firm ICRA.
Another major blow came with a court ban on passenger vehicles fitted with 2litre or larger diesel engines in the National Capital Region, one of the biggest markets for automakers. While the curbs were lifted mid-2016, the National Green Tribunal in last July directed the Delhi government’s transport department to deregister diesel vehicles that were 10 years or older. The government has moved the court against this order.
Advancement of the implementation of BS VI emission rules by skipping stage V, by two years to April 1, 2020 is another problem that automakers need to tackle, especially in the small-car segment.he price of diesel cars will “After 2020, the price of diesel cars will rise further, and the small diesel cars will go out of production because a diesel car that costs ` . 5 lakh now will cost a lakh more after Euro VI norms come into play. The equivalent petrol cars will . 4 lakh. So, people will not still be about ` buy diesel,“ RC Bhargava, chairman of Maruti Suzuki, told ETAuto in an earlier interview.
According to a study done by ICRA, diesel passenger vehicles meeting BS VI emission standards could cost ` . 75,000100,000 more compared with the current ones.
While Maruti announced stopping production of diesel Celerio, it is focusing more on petrol-powered versions for the recently launched Ignis. Just 18-20% of the Ignis will come with diesel engines.
All these mean that the billions of dollars the automakers invested in diesel technologies and assembly lines in India will not bring the returns they expected.
Companies have invested close to $2 billion on new diesel engines and capacities. Investment of another $1.5-2.4 billion was planned in diesel technology.
Several carmakers now have flexi fuel assembly line to mitigate the risk. Still, there will be some idle capacity. Honda Cars India, which invested about ` . 500 crore on diesel technology, is now focusing on exporting diesel engine parts from India to the UK to make use of its facility here.
According to Vishnu Mathur, directorgeneral of the Society of Indian Automobile Manufactures, the diesel car buyer will move to larger cars and small diesel cars will face the pressure.