Diesel cars may become costlier by Rs 1.8 lakh.

Currently, one of the main reasons for the high popularity of diesel cars is that the fuel is cheaper, which translates into low running costs.

Roudra Bhattacharya

New Delhi, Feb. 5

Honda, which sells only petrol cars in India, is looking forward to the implementation of the Kirit Parikh panel recommendations. This is because if the recommendations are accepted, diesel cars could become costlier by as much as Rs 1.8 lakh.

The Government-appointed panel wants an additional excise duty on diesel cars, besides de-regulation of petrol and diesel fuel prices. This will push up the price of diesel cars. Currently, one of the main reasons for the high popularity of diesel cars is that the fuel is cheaper, which translates into low running costs.

“They (the recommendations) will certainly help the sale of petrol vehicles in the country. We will obviously be benefited by such a move,” said a senior official from Honda Siel Cars India, adding that the Japanese company, which recently recalled 8,523 units of the 2007 City model, has not faced any drop in sales.

According to the Society of Indian Automobile Manufacturers (SIAM), carmakers with higher proportion of petrol models are likely to see a spike in sales, while those with a diesel bias may see a reverse trend.

“If these recommendations are adopted, it will certainly lead to a jump in sales of petrol vehicles as market forces will come into effect. Diesel vehicles, which are already more expensive by about Rs 1 lakh, will have an extra cost of Rs 80,000, which is the additional excise duty proposed. The total escalation of Rs 1.8 lakh for diesel vehicles versus similar petrol models will make such cars unviable,” a SIAM official told Business Line.

Besides Honda, other companies that are expected to see a jump in sales include Maruti Suzuki and Hyundai, both of which have significantly higher sales of petrol-powered vehicles vis-a-vis diesel models. Carmakers expected to be most hurt if the recommendations are adopted include Mahindra & Mahindra, the Tata Motors-Fiat combine, and Toyota.

These have a very high ratio of diesel models in their product portfolio.

According to Hyundai officials, since its largest selling models — the i10 and the Santro — were available only in petrol version, the company would expect a positive trend in sales.

Officials of neither Tata Motors nor Mahindra were available for comment.

“Although the more expensive car segments may not be much affected, sale of diesel cars around the Rs 4-5 lakh bracket — the compact car category will be hurt most,” said the industry association.

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(This article was published in the Business Line print edition dated February 6, 2010)
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