Auto cos produce less; warn against higher tax on diesel cars

Roudra Bhattacharya New Delhi | Updated on March 12, 2018



With the spike in petrol prices helping sales of diesel cars, the utilisation of production capacity for car makers has dropped by 5 per cent in 2011-12.

This is because most of the manufacturing capacity for large players such as Maruti Suzuki and Hyundai is designed for petrol cars.

And, the addition of fresh diesel engine capacity has not kept pace with the demand — companies such as Hyundai are wary of investing citing the Government's unclear stance on fuel pricing policy.

This information was part of the data presented by the Society of Indian Automobile Manufacturers (SIAM) on behalf of the carmakers to Finance Ministry officials on Thursday.

The Ministry had given the industry a week to present data to support the latter's argument against higher excise duty on diesel cars.

“We have received SIAM's inputs and we are considering it. All options are open,” a Government official said.

Higher taxes have been proposed by the Petroleum Ministry to reverse the current trend where the share of diesel cars sales versus petrol variants sharply jumped from about 35 per cent to 45 per cent (in a year). The shift has been taking place ever since petrol prices were de-regulated in June, 2010.

Diesel Slowdown

Incidentally, data of the last month show that even diesel car sales are now slowing down. In May, inventories of diesel vehicles for the industry more than doubled to 1.07 lakh units. Petrol inventories remained flat as carmakers cut production of such variants.

“The belief is that all diesel cars are selling like hotcakes. Only a few models such as the Maruti Swift, Dzire, Hyundai Verna and Mahindra XUV500 command waiting periods. The rest of the diesel range is not selling,” an industry official said.

This has been attributed to negative sentiment on high interest rates and a belief that that the Government could soon make diesel car ownership a more expensive affair.


Published on June 15, 2012

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