Auto companies, once banking on the craze for diesel cars, are now looking at ways to enhance their attractiveness, as under utilisation of diesel capacities hits them severely, with the gap between diesel and petrol prices shrinking.
The demand for diesel cars may see a further dip with the recent announcement of diesel having deregulated, "There is a reversal in trend as people are moving back to petrol cars. Original equipment manufacturers (OEMs) will have to reassess some strategies. Sales pitch will need to be changed, to lure the customers," said Mohit Arora, executive director, JD Power Asia Pacific.
According to industry estimates, some manufacturers having a larger diesel portfolio are even operating at 50% capacity. Dealers pointed out that some manufacturers have started reducing the price gap between the petrol and diesel variants. Prices of the petrol variants have been increased, while diesel variants are offered on a discount.
Arora pointed out that players like Mahindra & Mahindra and Tata Motors, with a larger diesel portfolio, will be most impacted. Addressing the growing acceptance of petrol cars, both manufacturers are already working on enhancing its offering. While Tata Motors has already come out with its Revetron petrol engines, M&M will soon introduce its all-new petrol engine soon.
According to industry estimates, in fiscal 2013 – the share of diesel cars in total sales went up to 58%. This was the year when the demand reached its peak to 62% in favour of diesel in the month of November, when the price difference between the two fuels reached Rs 32.
However, in 2014-15, petrol cars are back in action again, thanks to the shrinking gap between petrol and diesel fuel prices, post the government announced the deregulationof petrol in 2013. According to industry players, diesel car sales declined for the first time in the last 3 years, while petrol cars have grown 13-14%.
"We expect changes in product pipeline of companies, there will be engine downsizing, more fuel efficiency etc," said Arora. Without elaborating much on company's plan, Shekar Viswanathan, vice-chairman, Toyota Kirloskar Motor (TKM) said that all manufacturers are working on improving their products.
"Discount trend has been reversed. Manufacturers will have to look at ways to control and make sure that the demand between petrol and diesel is balanced," said Puneet Gupta, associate director, IHS Automotive Sales Forecasting.
We had earlier reported that Maruti Suzuki, the biggest car-maker in the country, is already keeping the cost under check of its upcoming small 800cc diesel engine, which is likely to power Celerio, Wagon R and its soon to be launched light commercial vehicle. The company is looking at bringing down the premium to around 50,000 or so. Currently a diesel car charges a premium of Rs1-1.5 lakh over a petrol variant.
"Small diesel engines can be a game changer. Though companies like Chevrolet have not been able to capitalise that (Beat has a diesel option). But Maruti's offering may help in driving sales of the entry level segment and will eventually boost the demand for diesel cars," said Gupta.
