Jeep faces rough ride if diesel ban spreads

When Fiat Chrysler Automobiles displayed its Jeep brands at the Auto Expo earlier this year, the diesel ban on 2000cc plus cars/SUVs in Delhi was inching towards the 50-day mark. It had been enforced last December hitting sales of Toyota Kirloskar, Mercedes-Benz and Mahindra & Mahindra.

The leadership team at Fiat Chrysler was only too aware that this meant that its Grand Cherokee and Wrangler would face hiccups as a result in Delhi. Yet, there was some hope in the air as most automakers were reasonably confident that the Supreme Court would see reason and the ban would soon be lifted.

Nothing of the kind has happened and it is now nearly 200 days since registrations of 2000cc (and over) diesel cars has come to a standstill in Delhi. The worst affected have been Toyota and Mercedes even while M&M is readying itself with sub-2 litre diesel engines as a solution.

Unlike the relative levels of optimism at the Expo, the outlook for carmakers has become a lot grimmer now as diesel is rapidly emerging as the green lobby’s favourite whipping boy. What is even more intimidating is the possibility of the ban being extended to other parts of the country with the National Green Tribunal seeking pollution data in cities from various States.

Quite recently, it looked as if Kerala was going to face a Delhi-like situation and it remains to be seen if other States will follow suit. If this happens, it will be a huge blow to Fiat Chrysler which is betting big on the Jeep brand to restart its fragile Indian innings that has been jinxed for years now.

The company wants to make the most of the SUV momentum in India with the launch of the Wrangler and Grand Cherokee which will be directly imported. The idea was to set up a handful of dealerships in select metros as part of the brand building effort.

Things could get a lot trickier now with the uncertainty on large diesel vehicles still looming large. For any company, this not only affects its production schedules but has the propensity to create panic across its supply chain comprising dealers and ancillary suppliers.

In the case of Fiat Chrysler, its retail mapping exercise for the Jeep could go out of the window should the diesel ban be enforced in other parts of the country. At a time when it is just about putting its house in order, it will be a tough task convincing its dealer community to hang in there and hope for the best. Sure, it is planning a petrol alternative for its offerings but this will really be no substitute for diesel which is the fuel of choice in SUVs.

Going forward, the idea is to kick off a localisation programme at the Tata-Fiat Pune plant which will make Jeep more competitively priced and easily accessible to the customer. The brand has been its biggest growth engine across the world and accounts for a large chunk of its sales.

Both Toyota and Mercedes have had an extraordinarily difficult time in Delhi since last December when the ban was enforced. In the case of the former, the market accounts for nearly eight per cent of its top-selling Innova and its recently launched Crysta is out of bounds in the Capital. As for Mercedes, the impact is far more severe as Delhi contributes to a hefty 20 per cent of sales.

The long wait for the ban to be lifted has wreaked havoc in the ecosystem with dealers of affected companies struggling to hold on to their employees who, in turn, see no reason to just sit idly around. This is something that would be worrying Fiat Chrysler too as a carefully laid out retail base may start crumbling even before it has started operations. For the moment, all the company can do is to keep its fingers crossed and hope that there is a happy ending to the entire diesel drama. Mercedes and Toyota have gone on record to say that this ad hoc ruling on diesel as a dirty fuel has the potential to hit investments in India. After all, automakers constantly need to plan for the future and any abrupt derailment in policy can throw planning out of gear as solutions cannot be worked out overnight.

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