Automakers decrease production of CNG vehicles as natural gas prices rise

CNG automakers have reduced their production targets to 500,000-550,000 vehicles for FY23. At the beginning of the current financial year, this target was 700,000-750,000

Indian automakers have been forced to cut the production of CNG-powered vehicles due to rising costs of natural gas. The automakers expect the rates to go up further in the upcoming round of revision, a report in Economic Times (ET) said.

The industry has reduced its production target to 500,000-550,000 vehicles for FY23. At the beginning of the current financial year, this target was 700,000-750,000. In FY22,  a total of 261,000 CNG vehicles were sold in India. 

The CNG prices are revised twice a year, once in April and again in October. Earlier in the year, when the petrol and diesel prices were rising, the demand for CNG prices was increasing. However, now that the prices have stabilised, the demand for such vehicles has also fallen.

ET further said that in the upcoming revision on October 1, CNG prices may go up Rs 12-15 per kg. This may lead to a fall in the savings from driving a CNG-powered vehicle. 

"If CNG prices continue to increase, it will have a negative impact," Shashank Srivastava, senior executive director at Maruti Suzuki said. In the current year, Maruti Suzuki plans to sell 400,000-450,000 CNG vehicles.

Motilal Oswal, in a note, said that there has been a 10-15 per cent impact on the CNG vehicle bookings due to a rise in its price. 

In October, the demand is likely to get a further hit if CNG prices are raised. Taxi and auto drivers have also been asking the government to hike the basic fare due to rising CNG prices.