Won't be difficult for firms to fully give up diesel vehicles: R C Bhargava

Automobile companies in India will not find it difficult to completely stop producing diesel-run vehicles as most have alternative technologies available with them, Maruti Suzuki India Chairman R C Bhargava said on Tuesday.

On September 12, Road Transport and Highways Minister Nitin Gadkari said the automobile industry must reduce the production of high carbon-emitting diesel vehicles, or else the government may consider imposing an additional 10 per cent goods and services tax (GST).

As major auto stocks tumbled in reaction, he clarified that no such proposal was under the government’s consideration.

Mahindra & Mahindra, Hyundai, Tata Motors, Toyota Kirloskar and Kia are the major players in the diesel car market. Maruti stopped producing diesel-run cars in 2019-20.

“The government is not saying don't manufacture diesel cars. They are saying that we have to achieve our carbon neutrality norms. The Cafe (Corporate Average Fuel Efficiency/Economy) norms are being enforced in the country,” Bhargava said at a convention organised by the All India Management Association (Aima).

Under the Cafe norms, the government has imposed restrictions on the carbon dioxide emissions of an entire car company's fleet.

According to Bhargava, the prices of diesel cars will become “exorbitantly high” as these norms continue to be implemented in phases.

“The reason Maruti and some other companies have given up on diesel production is because of the cost factor. If you want to comply with the norms regarding carbon neutrality, you will not be able to sell cars at a price which anybody will buy. Companies are changing. Most companies have got alternatives available with them. It is not going to be difficult for companies to give up diesel completely,” he explained.

He said the company plans to launch six EVs by 2030-31, considering the anticipated annual sales of about 6.5-7 million units in the Indian car market by that time.

In 2022-23, Indian car firms sold 3.89 million units domestically.

“Now, if we have to keep 45-50 per cent of the market, you can’t do that by having one or two (EV) models. You need to have a large number of models to get the kind of volumes that we want to have. Six models are the minimum we require,” he said.

He said that by FY31, even with six EV models, only about 15-20 per cent of the company’s total sales will be from EVs.

He said that two factors have not boosted manufacturing growth in the country: state administrations still operate in archaic ways, and entrepreneurs prioritise showmanship over their businesses.

“The bureaucracy and administration in state governments have still not changed the way the central government has changed. There are lots of delays, time is not a factor that is valued by most people in states, the attitude of administration is similar to what it used to be in licence and control days (licence raj) when the job of the civil servant was to control rather than to facilitate,” he said.

Bhargava also expressed concern that as long as the system continues where entrepreneurs and businessmen prioritise showcasing personal wealth and generating personal incomes over growing their companies, the manufacturing growth rate in India is unlikely to increase.

He explained that the manufacturing sector should grow at a rate of about 12 per cent instead of the current 5 per cent.

He added that the India auto industry's annual sales are expected to grow at a rate of about 5 per cent a year in the next ten years. This rate could have been 8-10 per cent had the entry-level car market been growing right now.

He said that the entry-level car market has completely stopped growing and a portion of these consumers have shifted to buying comparatively expensive sport utility vehicles (SUVs).

According to the Society of Indian Automobile Manufacturers (Siam) data, the sales of hatchbacks and sedans decreased by about 6.5 per cent year-on-year (Y-o-Y) in the April-August period.