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Customer LoginsAutomakers in India shelve diesel engine plans for small cars
A slew of policy changes and activism against diesel technology has resulted in a decline in its market share.
- Significance: Several global automakers including Maruti Suzuki, Tata Motors, Toyota, and Honda have shelved their plans to develop and launch diesel engines in small cars in India.
- Implications: The share of diesel technology in small passenger vehicles is declining and the trend is likely to pick up pace following the introduction of Bharat Stage VI emission norms in 2020.
- Outlook: Given the regulatory headwinds, small vehicles are not natural fits for diesel engines in the way SUVs and MPVs are, where high torque is the prime consideration.
Several global automakers have shelved their plans to develop and launch diesel engines in small cars in India. According to a report by The Economic Times, Maruti Suzuki, Tata Motors, Toyota, and Honda are among the automakers which have either stopped developing small diesel engines or are reconsidering their plans. Citing unnamed people with knowledge of the issue, the report added that automakers have taken the decision in the wake of the uncertainty created after recent court orders and government moves that have significantly diminished the attractiveness of diesel vehicles for consumers. These top-level changes have gone towards creating an image among buyers that diesel technology is in the regulatory line of fire. As a result, buyers are shifting away from diesel to petrol (gasoline) technology in passenger cars.
Maruti Suzuki, which currently offers its 800 cc diesel engine with the Celerio hatchback, is evaluating the possibility of no longer offering the engine in other models, said the report, citing three people with knowledge of the matter. Similarly, Toyota - which was planning to make use of its 1.5-litre diesel engine on the Vios sedan - has dropped the plan. Honda was considering developing a 1.2-litre, 3-cylinder diesel powerplant for its upcoming small car; however, the Japanese automaker has now dropped those plans. Among the homegrown automakers, Tata Motors has reportedly put its plans of using 1.2-litre and 1.6-litre engines in small passenger vehicles on hold.
Outlook and Implications
The reported move from automakers, if true, will not be surprising given the considerable policy and judicial changes the technology has witnessed in the recent past. Diesel has always been a difficult matter for automakers in India. In 2011, automakers were caught on the back foot as retail petrol prices surged on the back of high crude oil prices. The situation caused buyers to shift to subsidised diesel fuel because of diesel vehicles' high fuel efficiency and low rates. Automakers were not able to produce enough to accommodate the demand for diesel vehicles but subsequent years saw a surge in demand for these vehicles.
However, the situation has gradually changed with consumers now preferring petrol vehicles over their diesel counterparts following the conditional ban on diesel vehicles in the national capital region (NCR) last year. In recent years, the government phased out the subsidy on diesel fuel, in turn making diesel vehicles slightly uncompetitive to petrol ones. The ban was eventually lifted by the Supreme Court in the NCR nearly eight months down the line, but not before sending out a strong message to consumers that painted diesel vehicles negatively. Earlier this year, the government imposed an infrastructure tax on vehicles that was disproportionately high on diesel vehicles.
As such, the uncertainty around the fuel and the high acquisition cost of diesel vehicles has not helped its cause. With the proposed introduction of Bharat Stage VI emission norms in 2020, it is natural for automakers to take a longer-term view of their product and technology plans. In this scenario, small vehicles are not natural fits for diesel engines the way SUVs and MPVs are, where high torque is the prime consideration.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.