Diesel car makers overtaken by demand surge

Amid sagging sales in a market saddled with high interest rates, automobile manufacturers are now struggling to deliver to the increasing demand coming in for diesel vehicles on the back of shortage in components. 

According to industry estimates, diesel propelled cars used to account for about 30 per cent of all passenger vehicle sales. However, after the sharp increase in petrol price from May, this proportion has increased to as much as 46 per cent. 

A report by the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum shows demand for petrol dropped below that of diesel for the first time in 15 years in August. The price differential between the two fuels, now Rs 28 a litre, has made an increasing number of consumers opt for diesel variants of vehicles, despite these being costlier by Rs 1-1.25 lakh on average. 

A senior executive at Maruti Suzuki said, “While earlier 60-65 per cent of sales used to come in for diesel variants for models which have the fuel option, this has now gone up to 80 per cent. We have capacity to manufacture around 250,000 units diesel engines. This is now being ramped up to roll out 300,000 units per annum.” 

However, even at the enhanced levels, there is likely to be a demand-supply mismatch of engines for making diesel cars. The company, at present, sells close to 27,000 units of diesel Ritz, Swift, DZire and SX4 every month. 

Ford, which registers nearly 75 per cent of sales for the FIgo from the diesel variant, is working with suppliers to ease supply constraints. Michael Boneham, president and managing director, Ford India said, “We are facing constraints in supply of components for diesel vehicles. We are working with our suppliers to meet the increase in demand for diesel cars. The demand will stabilize as people get used to the price differential between the fuels but diesel will continue to dominate in many segments.” 

Industry sources indicate, Hyundai Motor India Limited (HMIL) too is facing constraints in supplies for diesel cars. The company has an order book of around 20,000 units for sedan Verna but is producing on an average a little over 4500 units of the car every month due to shortage of components. 

Toyota, which recently introduced diesel variants of sedan Etios and hatchback Liva, has received 12,000 bookings for the two cars. 

Sandeep Singh, deputy managing director, Toyota Kirloskar Motor (TKM) said, “The demand for diesel variants for our cars has increased to as much as 75-80 per cent in sales for the model. But at present, we can use only 50 per cent of the available capacity to manufacture diesel vehicles.” The company currently is producing 6500-7000 units of the Etios and the Liva from its second plant in Bangalore. 

The waiting period for these cars has gone up to two and a half to three months. “We are educating our customers that they should buy diesel only if usage is around 2500 km per month and have been able to convert some sales to petrol”, Singh added.