Diesel phase-out effect sets in

Given the minimal cost benefit, the demand for diesel cars was already on the way down in metros like Bengaluru.

Many manufacturers are on their way to stopping the production of diesel cars.

Bengaluru car dealers are selling the last of some diesel variants. They say cities have traditionally preferred petrol over diesel when it comes to private vehicles, so the impact of many diesel cars being phased out will be minimal.

The CEO of a prominent showroom chain says people living in rural areas depend mostly on diesel cars as connectivity by rail and air is not so good.

For them, the drives are longer, unlike in the cities, where car owners just travel to work and back.

“Diesel works out better in rural areas, which is why they see a higher demand for diesel cars. SUVs are also meant for long-distance driving, and so mostly come in diesel variants, he says.

Commercial vehicles, like cabs and trucks, account for almost three-fourths of India’s diesel consumption in vehicles. Ask any fuel bunk on the highway and they will say they sell more diesel than petrol. This demand is fuelled by trucks, he says.

Agreeing that mainly diesel models were sold in the SUV and commercial segment, Ajay Singh, director, sales and marketing, Advaith Hyundai, points out that many people are not aware of the policy changes that impact carmakers, and subsequently their decisions about what products to keep and what products to phase out.

Industry insiders say spares will continue to be available long after some models are phased out.

“The supply of components and spares will not be affected because manufacturers will have a supply of these. They would have sold many cars and in any case, service is also one of their major streams of revenue. I believe availability of spare parts will not be a problem,” says the CEO.

Ajay Singh, on the other hand, believes while supply of spares largely depends on the company, there may be a crunch once a model is discontinued.

Growing customer base

India’s burgeoning middle-class provides growing numbers, so why are carmakers discontinuing popular variants?

While India’s biggest carmaker Maruti Suzuki announced its decision to completely end production of diesel cars, Mahindra and Tata Motors have decided to phase out production of some of their diesel models.

Diesel cars contribute a fair share to the bottomline of these companies, but they no longer find it viable to manufacture them, say trade insiders.

New emission norms

As our cities are ranked among the most polluted cities in the world, the government has decided to switch to cleaner fuel.

In keeping with this, only Bharat Stage VI compliant vehicles (both petrol and diesel) will be sold in the country from April 1, 2020.

Bharat Stage refers to the emission regulation standards instituted by the Centre to regulate pollutants from automobiles. Bharat Stage metrics are based on European emission norms.

Carmakers had three choices—upgrading existing diesel engines to BS-VI compliant models, designing new engines to meet the more stringent standards, or stop production altogether.

The first two options mean huge costs, which would then have to be passed on to the consumer, making the model unviable.

Why is it being enforced?

Worsening air quality in major cities, including Delhi and Bengaluru, has caused the government to come up with strict norms.

“According to the air quality index, Bengaluru is not as polluted as Delhi when it comes to chemical pollutants but when it comes to PM 10 and PM 2.5, we are very close,” says Ravi Kumar R B, automobile enthusiast network and architect at TriVium India Software.

Cheaper initially...

Lower prices and better engine efficiency fuelled the demand for diesel initially.

“Diesel was preferred over petrol because even though the performance was a little low, drivers would save a lot on fuel. Diesel engines are normally lean burners, meaning they use less fuel and more air to give the same performance as petrol. However, the emission of nitrogen oxide and fine particles is higher from diesel engines; this causes significant respiratory and cancer risks,” adds Ravi.  

As time passed, the price gap between petrol and diesel cars narrowed considerably, points out Deccan Herald automobile specialist Vivek Phadnis.

“Also, the maintenance of diesel cars turned out cumbersome. If you leave a petrol car unused for a few days, it is not a problem, but that is not the case with a diesel version,” he says.

 

Global trend

Diesel cars are steadily falling out of favour globally, too.

Toyota is discontinuing diesel cars in Europe, and Porsche and Volvo say their future models won’t get a diesel engine. In India, Tata Motors is expected to fit diesel engines only in bigger, more expensive offerings such as the Altroz, Nexon and Harrier.

Diesel penalised in Delhi

When the Air Quality Index went red in New Delhi, the Supreme Court temporarily banned registration of diesel vehicles above 2,000 cc in December 2015; the curbs were eventually lifted. Another blow was struck in the form of deregulation of diesel.

Upgraded diesel models may not be economically viable

Today, the difference between the prices of diesel and petrol is only Rs 4-5, while earlier it was Rs 10-12. It made sense for the customer to opt for a diesel variant.

The difference between the prices of petrol and diesel cars is Rs 1 lakh for smaller cars and Rs 1.5-2 lakh for bigger ones. The cost of upgrading to BS-VI engines increase the cost of production. The GST slab on passenger vehicles is 45-48 per cent. The increase in cost will be almost double then. The carmakers feel people in a price-sensitive market like India will not invest this much. People who already have diesel cars will continue using them for as long as possible since a replacement will be expensive. So, demand for other diesel models might come down.

— CEO of a prominent showroom chain in Bengaluru

Alternatives few

“In commercial vehicles, CNG is an alternative but it is not present across the country, and very few people are aware of its benefits. CNG bunks are far and few, even in the metros. The government is promoting electronic vehicles but mass production has a long way to go. The infrastructure for these is also not readily available.- Ajay Singh, Director, sales and marketing, Advaith Hyundai

End of road

Diesel engines in these cars are being discontinued

- Tata Motor’s Tiago and Tigor

- Maruti’s Swift, Dzire, Baleno, Ciaz, Vitara Brezza, S-Cross and Ertiga

 

 

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