Declining Diesel vehicle sales: End on an Era??

Maruti recently announced to phase out its Diesel engine production and sales in India by 1^st.April.2020. A day later comments from Tata Motors went into the same direction quoting that producing Diesel engines especially the smaller ones are not justifying the investments involved. Automobile production is a capital intensive business and inadequate ROI is bound to worry automakers. These concerns and steps are not happening just like that. Following are some of the key Reasons for diversion of focus from Diesel vehicles to other fuel systems:

·         Deregulation of the Diesel prices in India brought Diesel prices near to that of Petrol, and it has been a key reason for decline in the sales of Diesel vehicles. Diesel cars are more expensive than the Petrol cars but due to low Diesel prices as compared to Petrol, lot many customers preferred to buy Diesel cars knowing the fact that running cost will be lower in the case of Diesel vehicles. But that advantage is gone now as Diesel and Petrol prices are very close now in fact Diesel prices are higher than Petrol in some cases. To quote, Diesel price in Odisha on 22.10.2018 were Rs.80.40 as compared to Rs.80.27 of Petrol.

·         Bharat Stage VI emissions standards will come into force in the year 2020 which will require automakers to invest further in order to adhere with these stringent carbon emission norms. The automakers will surely not be able to cope up with the additional cost at their level and If the additional cost is passed onto the customers, sales of Diesel cars will decline further. The same has been witnessed in the European markets as well, where Euro VI standards are in force and Diesel vehicle sale has witnessed downfall there too. The move is believed to influence Indian market more due to its price sensitive nature.

·         Legal restriction like ban on aging Diesel vehicles imposed by Supreme Court and National Green Tribunal (Diesel vehicles older than 10 years have been banned in the region of Delhi NCR. Limit for Petrol vehicles is 15 years which further hampers the growth of Diesel vehicle sales).

·         Deteriorating climatic conditions will further encourage steps to keep a check on carbon emissions and this phenomenon will have direct impact on the Diesel vehicle sales as Diesel vehicles are arguably considered to be one of main reason for severe pollution levels.

·         Introduction of CNG and other hybrid technologies like electric cars etc. has already caused huge losses for the traditional automakers globally and this loss seems to be compounding in the years to come. In India customer have started looking up to electric cars as good, safe and efficient mode of transportation and this inclination will further encourage the sales of electric cars in our country.

Companies are now focusing more on Petrol and other hybrid systems, though not only by choice. This kind of ecosystem will further demotivate investments in Diesel engine making but this situation also opens doors for better technological solutions in automobile industry. All automakers in India needs to do is to brace for the disruption and keep themselves ready for the paradigm shift in Indian Automobile sector.