Market leader Maruti Suzuki is planning to shut its diesel assembly plant in Gurugram. This can be viewed as an ominous sign that the end is near for diesel cars, which are already suffering from falling sales and increasing compliance costs.
The discourse on the end of diesel cars in India has shifted from ‘if’ to ‘when’ in a short span of time, as new technologies like CNG, hybrid and electric vehicles take over popular imagination.
Signs of demise are even more ominous for a technology when the market leader decides to give it up. Maruti Suzuki has done just that by closing its diesel engine assembly plant in Gurugram according to a report by Mint. According to sources, the company may convert the diesel engine line to petrol engines or add an assembly line for petrol engines to its plant in Manesar.
The move by Maruti comes amidst falling sales of diesel cars in India. Besides the shift to new technologies, the price differential between petrol and diesel has reduced. Data indicates that during H1, 2018, share of diesel vehicles in market share reduced to 55% from 70% in the Northern region, whereas petrol cars’ share increased from 30% to 45%. Overall, petrol cars accounted for 60% of car sales in India in FY 2018 as compared to 47% in FY 2014. The share of diesel on the other hand has dropped from 53% to 40% during the same period.
The situation is expected to get worse as diesel cars become costlier after introduction of Bharat Stage VI norms from April 1, 2020. Meanwhile, parent company Suzuki is focusing on hybrid and electric cars, which are also a key component of its partnership with Toyota Motor Corp. It is working on a US$ 1.4 billion R&D project for a full hybrid car for India. Its CNG portfolio has been growing at a rate of 50% yoy so far in the current fiscal.
Maruti’s diesel assembly line in Gurgaon has a production capacity of around 170,000 engines per annum. In addition, it makes a 1.3-litre diesel engine for Fiat at its Manesar plant, which has a capacity of 300,000 units per annum. According to sources, the company will replace the 1.3-litre engine with a 1.5-litre engine for its vehicles.
Like Maruti, other global auto majors like Groupe Renault SA and Daimler AG have cut down on manufacturing of diesel vehicles in Europe as customers fear increasing regulatory hassles for diesel cars. Maruti is the first to make such a major cut in production of diesel engines in India after the implementation of BS VI. It has already stopped providing the 800cc diesel engine option in its small car models.