Diesel car sales lose momentum as steady rise in fuel price hits demand

India’s fascination for the diesel car seems to be burning out.

Maruti Suzuki, the country’s largest automaker, reported a sharp dip in the sales of diesel cars in the October-December quarter of 2013-14 compared to the year-ago period. Diesel car sales slipped to 33 per cent (88,000 units) of all cars sold compared to 40 per cent (1.07 lakh units) in the previous year’s quarter.

This trend is equally true for other carmakers which have both fuel options in their product portfolio.

Honda, for instance, had a hefty 82 per cent diesel share for its Amaze compact sedan when it was launched in 2012. This has since come down to 60 per cent though diesel is the fuel of choice for the City too. Tata Motors, essentially a diesel carmaker, recently launched its Revotron petrol engine option clearly with an eye on grabbing the market’s changing fuel preference with the momentum for diesel cars slowing distinctly.

This clearly reflects the impact of the Government’s move to free diesel prices in phases even though the hikes have been barely 50 paise each month. The net effect, though, has been considerable given that diesel was barely ₹41/litre in May 2012 and costs nearly ₹55 now, a hike of 40 per cent.

In contrast, the price of petrol, which was perceived as the rich man’s fuel, has been relatively constant during this period though at over ₹75/litre it is dearer than diesel.

“The price differential between these two fuels is not as profound as it was a couple of years ago. Customers are also aware that diesel prices will continue to be hiked in small doses which will reduce the gap even further,” a top automobile company executive said.

For Maruti, the declining trend is evident also across a longer, nine-month timeframe (April-December), with the company’s share of diesel car sales falling to 32 per cent from 38 per cent in 2012-13. In terms of numbers, this translates into 2.44 lakh diesel cars sold this year (of the total 7.55 lakh units) against 2.81 lakh (7.42 lakh) units in the April-December period last fiscal.

This is in sharp contrast to 2011, when diesel cars accounted for over 50 per cent of Maruti’s sales.

Maruti’s diesel car range comprises the Swift, the Dzire, the Wagon R, the Ritz and the SX4. Most of these models are popular personal cars, though the Dzire is preferred in the taxi segment that is largely powered by diesel.

Petrol cars, which were given the cold shoulder during the diesel wave of 2011-12, are making a strong comeback. In the case of Maruti, the stupendous market response to the recently launched Celerio will only cement the preference for this fuel. It is quite likely that petrol, which now accounts for 67 per cent of the company’s sales, will see its share inch towards 80 per cent by the end of March 31, 2015.

The SUV segment may be the exception with likes of the Renault Duster and the Mahindra Scorpio riding high on diesel.

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