Factors that are expected to work against diesel vehicles include price hikes that would likely be sharper than on petrol-run models and continuing uncertainty over the availability of BS-VI compliant fuel across the country. Companies that focus on large diesel-powered utility vehicles could therefore take a bigger hit, at least initially, than those that specialise in petrol.
Introduction of BS-VI would impact the sub ₹10 lakh and the ₹10 lakh-plus price bands differently, said Vinay Raghunath, partner and leader, automotive, EY. “In the first category, OEMs have already announced and launched BS-VI capable gasoline (petrol) powertrain variants while keeping the price rise marginal, which should give a boost to the gasoline powertrain segmental share. In the greater than ₹10 lakh segment, it’s clear that due to BS-VI transition there will be a significant price increase in the diesel powertrain variants.”
Maruti Suzuki chairman RC Bhargava said sales of petrol cars could likely grow at the expense of diesel cars after the transition, with the sub-₹10 lakh petrol models likely to see faster expansion. The rule in the NCR limiting the life of diesel vehicles to 10 years and that of petrol to 15 years could also influence buying decisions, he added.
Maruti Suzuki has the largest petrol small-car portfolio in India. Over the recent years, sales of petrol cars have gone up, he said.
Fuel efficiency and performance of petrol vehicles have also improved, offsetting an advantage diesel had over the lighter fuel. The downside of petrol cars as a variant is not there anymore, said expert.
“We have to see how consumer behaviour plays out over the next couple of quarters, with respect to continuing popularity of certain combinations of vehicle body type & powertrains, price elasticity and the perceived product value proposition” said EY’s Raghunath.
While the price impact on petrol variants of compact cars and SUVs would be in the range of 3-5%, it is the larger diesel vehicles, that would be a minimum of 8-10%, according to industry experts. Companies like Mahindra & Mahindra that have a large portfolio of products priced above ₹10 lakh would have to pass on their higher cost to customers, they said.
What this means is that a small BS-VI passenger car in the ₹5 lakh bracket would becoming costlier by about ₹25,000 which can easily be afforded by its consumer, while a diesel SUV costing Rs 10 lakh would become dearer by nearly ₹1 lakh, making it potentially unattractive to customers.
Another factor is that BS-IV petrol can be used in BS-VI variants, but the same is not the case with diesel, where BS-VI engines will require fuel compliant with the same standards. There is no certainty over the availability of BS-VI diesel on a pan-India basis, thereby giving headaches to diesel vehicle makers. Diesel SUVs are highly used in rural India and it is doubtful if BS-VI diesel reaches interior parts of the country by April.
For Mahindra which has a predominantly diesel portfolio, this is not good news. The UV major has been increasing its petrol mix and has just transitioned into the BSVI petrol version for the XUV300 last month. In fact, this model is its only BS-VI offering so far. Models like the Scorpio and XUV500 are likely to become much costlier after the introduction of the new emission standards.
Hyundai Motor, though, has a different take. With leaders vacating the small diesel engine space, at least temporarily, the Korean company has an opportunity to play in this segment. “We will foray into the diesel space with a wide range of diesel engines giving us additional volumes and the ability to price attractively,” said Hyundai Motor India’s sales head, Vikas Jain.