Fuel deregulation: Car makers cautious on diesel model launches

Car makers are anxiously watching the government’s move over its stated intention to deregulate diesel prices, as future model variants to be launched in India will depend entirely on the price at which the cheaper (than petrol) fuel is sold.

Car makers such as Mitsubishi, Maruti Suzuki, Toyota Kirloskar and Ford India are reviewing their plans of adding diesel engine options to the existing petrol models. Presently, diesel is cheaper than petrol by a minimum of 28 per cent, going up to 40 per cent in the four major metros.

Sandeep Singh, deputy managing director (sales and marketing), Toyota Kirloskar, said, “Our decision on launching the diesel variant for the Etios or for other models will be based on the government’s move for the fuel. About 50 per cent of small car buyers are buying diesel models currently but this will be reviewed if diesel prices go up.”

Besides being the cheaper fuel, thanks to the heavy subsidy provided by the government, diesel has traditionally been more fuel-efficient than petrol counterparts, due to the high energy content in the fuel. Diesel models also command a premium over petrol variants, which can range between Rs 50,000 and Rs 100,000 for compact cars and sedans, due to their expensive and complex technology.

However, with engineers working on tuning petrol engines to make these more fuel efficient, car makers are focusing more on petrol.

Y V S Vijay Kumar, executive vice president and business head of the Chennai car plant of Hindustan Motors, said, “Our diesel Outlander may not come to India very soon, as there is uncertainty over the price of the fuel. Customers will move towards the petrol models as they carry more power and refinement, if the price of diesel goes up.”

Outlander is the premium sports utility vehicle from Mitsubishi and is presently sold only with a petrol engine.

Korea’s Hyundai Motor had reportedly concluded a recent feasibility study for having a diesel engine plant in the country which would have an annual capacity of 300,000 units per annum. The company is yet to decide on the proposed plant, whose study was conducted prior to the government’s deregulation plans. The plant would cost $550 million (Rs 2,500 crore).

Arvind Saxena, director, sales and marketing, Hyundai Motor India, said “Over foru to six years, the price gap between petrol and diesel has narrowed considerably. After the deregulation, this gap is expected to narrow even further and this will increase the demand for gasoline powered cars.”

Ford India is in a more comfortable situation. It has built a one-its-kind engine plant, which can manufacture both petrol and diesel engines on the same manufacturing line.