Demand for diesel cars has come down as the gap between diesel and petrol retail prices narrowed, besides uncertainty over the life span of diesel-run vehicles due to the environmental concerns.
The share of diesel cars in total car sales has already come down to 14 per cent in the first quarter of FY2020 and from 47 per cent in FY2013.
Looking at this year, the gap in prices of petrol and diesel is expected to decline further. So far in 2020, petrol prices are up by 60 paise, while diesel prices have gone up by 83 paise.
Add to this, diesel prices went up by over Rs 2 in the month ago as against a mere rise of 0.25 paise in prices of petrol.
In New Delhi, a litre of petrol on Tuesday was sold at Rs 75.74 and diesel Rs 68.79.
Experts say premium paid on diesel vehicles could only be realised if owners are willing to drive longer covering more kilometres, which does not make economic sense for everyone. At present, the diesel variant of any model is expensive by Rs 1-2 lakh than its petrol counterpart.
Apart from that, other factors such as ban on use of diesel vehicles for more than 10 years in the National Capital Region (NCR) and announcement made by automakers to stop selling diesel-run cars post the implementation of newer BS-VI emission norms is also likely to have a big impact on demand for diesel cars in 2020.
India’s leading carmaker Maruti Suzuki India has already announced plans to stop the sale of diesel vehicles (fitted with up to 1.3 litre diesel engines) from April 2020 due to the high costs of upgrading them to meet the new emission norms which would lead to a substantial hike in their car prices.
If the carmaker goes ahead with its plan, demand for diesel vehicles would take a big hit in all segments including the utility vehicle segment where diesel is the preferred choice.
The share of petrol-driven SUVs has already grown from low single-digit in FY2013 to around 23 per cent by the end of first quarter FY20.
According to industry estimates, prices of small BSVI-compliant diesel cars could see a whopping rise of up to Rs 1.5 lakh per unit.
However, MSIL in recent times has hinted that it might develop BS-VI engines depending on the market sentiment. Other carmakers such as Mahindra and Mahindra, Tata Motors, Toyota Kirloskar Motor, Volkswagen India, and Renault India have announced plans to pull the plug on diesel variants (those powered by 1.2- to 1.3-litre engines).