Automakers Risk Missing Diesel Boat in India

Paul Myles

TU-Editor

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13th August 2020

Automakers have been warned not to can all its diesel powertrains for its products in India because the demand remains for many consumers.

While admitting rising costs and tightening government emission restrictions have seen a steep decline in diesel sales, Bakar Sadik Agwan, senior automotive consultant at analyst GlobalData, believes it is far too soon to retreat from the market altogether. He said: “OEMs are certainly not finding the diesel segment in India as lucrative as before. Market leader Maruti Suzuki and other players including Nissan and Renault are looking to phase out their existing diesel variants and introduce more petrol, CNG or hybrid variants. Volkswagen is the latest OEM to join the list as the company plans to exit diesel passenger car market in India as part of its ‘India 2.0 strategy’. However, the company will continue to be present in the passenger vehicles segment as it intends to continue to supply SUVs in the Indian market.”

The decline in demand for diesel has been driven by the narrowing price gap between diesel and gasoline, with the share of diesel variants in the total passenger car sales declining to 29% in 2020 compared to 58% in 2013. Agwan said the diesel variants used to maintain an edge in the Indian market because of a lower operating cost-per-mile which now stands on par with gasoline vehicles. Additionally, the taxes on diesel vehicles also substantially increased the cost of diesel vehicle ownership, in-turn decreasing their demand.

Regulation

He added: “The implementation of BS VI emission norms starting from April 2020 further added fuel to the fire. BS VI diesel engines are costlier, which makes the diesel cars economically unviable for most customers looking for cars in small and mid-size segment.”

Yet, automakers should consider the larger premium and utility vehicles where diesel makes a much more powerful argument than with smaller vehicles. Agwan said: “However, it does not mean the end of the road for diesel engines as they would continue to find takers in the SUV, MPV as well as pick-up segments. Players such as Hyundai, Tata Motors, Mahindra & Mahindra and Honda continue to plan diesel variants.

“Hyundai in early 2020 announced that it will continue to bring diesel PVs in the market. 2020 Hyundai Creta has amassed over 65,000 bookings within four months of its launch and the diesel variant is witnessing higher demand. Mahindra & Mahindra, a leader in SUVs, also stated that most of its SUVs will continue to have diesel variants. Market for diesel passenger vehicles would certainly shrink but customers with certain kind of needs and preferences are likely to continue to find diesel variants in the brochures.”

Forum boost

Diesel powertrains received a further boost this week with the announcement that a new major global automotive player has joined the influential lobby group, the Diesel Technology Forum. Old World Industries (OWI), a global automotive and chemical industries supplier, has joined the forum and brings with it the expertise in managing more than a dozen consumer and commercial brands across 62 countries, including its PEAK and BlueDEF brands of automotive functional fluids.

Allen Schaeffer, executive director of the forum, said: “OWI manufactures and distributes BlueDEF, America’s number one diesel exhaust fluid brand… a critical component of many of today’s advanced clean diesel engines, vehicles and equipment, which makes OWI a great addition to our growing membership.”

— Paul Myles is a seasoned automotive journalist based in London. Follow him on Twitter @Paulmyles_