Till about three years ago, diesel was the monarch of all it surveyed. Its affordable price tag made it the darling of customers and carmakers had a field day as sales soared.
The first blow came when the Centre knocked off its subsidy element and the market suddenly realised that diesel was no longer so cheap. More recently, the ban on 2000 cc plus diesel cars in Delhi followed now by Kerala has flummoxed automakers who along with their suppliers have invested ₹75,000 crore in diesel engines.
“The ban is causing a lot of apprehension in the minds of customers which has caused a further shift to petrol. A car is made up of thousands of parts. The supply chain is complex and there is a lead time for adapting to change,” says Jnaneswar Sen, Senior Vice President, Marketing and Sales, Honda Cars India.
The best part is that his company, unlike Toyota or Mercedes, does not have a 2000cc diesel vehicle and is, hence, not affected. Yet, Sen says the Supreme Court ban in December had its fallout on the top-selling City model during January-March. Where the initial projections were 60 per cent petrol and the balance diesel, it shifted to 72 per cent petrol and 28 per cent diesel.
“We were not geared up for this and ended up being stuck with diesel cars while our City petrol has a waiting period,” says Sen. Ironically, Honda had suffered during the diesel craze of 2011-12 since it did not have any option to offer. By the time it was ready with its own engine, the diesel halo was fast disappearing.
Feeling the pressure By the end of FY ‘15, the likes of Mahindra & Mahindra, Tata Motors, Toyota Kirloskar, General Motors, Mercedes-Benz India, BMW and Ford India committed themselves to investments worth nearly ₹9,500 crore . They will now have reasons to feel quite concerned especially if more States follow Delhi and Kerala in banning large diesel cars.
Among the worst hit is Toyota Kirloskar whose Vice-Chairman and Director, Shekar Viswanathan, insists that diesel is no more polluting than petrol or compressed natural gas when used with the latest technology. “Diesel engine technology will continue to be an integral part of every automaker considering stringent fuel efficiency norms being introduced in 2017,” he says.
Viswanathan also believes that the “unintended beneficiaries of this ban are those who produce less than 2000cc vehicles with the same diesel that is said to be polluting”.
It is not a view that finds resonance with Anumita Roychowdhury, Executive Director at the Centre for Science and Environment. According to her, the diesel subsidy was meant for farmers and freight carriers. “The industry has been taking advantage (of the subsidy). When I use the same car with petrol, I am paying more tax which does not make economic sense. Somewhere, there had to be a crackdown and industry should have been wiser,” she says.
In the meantime, M&M and Tata Motors are now planning to circumvent the ban by fitting smaller diesel engines in their vehicles. Alternatively, they are also launching petrol versions to keep in line with market realities.
Whether this will strike a chord with SUV customers is a million dollar question as smaller engines could compromise on power. Likewise, petrol may not be a viable option for reasons of mileage and price. A typical diesel engine gives 25-30 per cent more mileage than a similar sized petrol-powered vehicle and can also travel longer distances.