The popularity of diesel vehicles in the Indian auto industry may take a further hit, with few models getting the BS-VI upgrade. And, the ones that get it have seen the price gap further widening from petrol versions, putting a question on their demand in a market hammered by the COVID-19 crisis.
The share of diesel-powered passenger vehicles fell below 20 percent during FY20 making it a new low in many years. Now, 80 percent of all cars and SUVs sold in India are powered by petrol, or a mix of petrol and CNG fuels.
While car-market leader Maruti Suzuki gave up on diesel engines with the assumption that the premium on diesel-powered cars will discourage buyers, its rivals have gone ahead in launching Bharat Stage VI (BS-VI) upgrades.
A handful of diesel-powered cars and SUVs have received the BS-VI upgrades even as the majority of companies have shunned the idea. Prices of both diesel and petrol options have gone north with the switch over to the BS-VI emission norms.
The upgrades, however, were expected to make diesel variants even costlier, further widening the gap between petrol and diesel variants.
Tata Nexon, for instance, has seen the biggest jump in diesel variant prices. The gap between its base diesel and base petrol variant now stands at Rs 1.5 lakh, up from Rs 1 lakh when the compact SUV was powered by a BS-IV engine.
Among the models that had a petrol variant also on offer in BS-IV it is only the Nexon which has received the upgrade in diesel in the Tata line-up. Two other Tata cars – Tiago and Tigor – have got only petrol upgrades while there is uncertainty over diesel upgrades.
Korean car brand Hyundai has been the strongest proponent of the diesel demand. All of its models that had a BS-IV diesel variant on offer have been upgraded to BS-VI. The company has managed to limit the price hike in diesel variants.
The gap between petrol and diesel variants of the Hyundai Venue has seen a jump of only Rs 15,000 under BS-VI compared to BS-IV. The difference between the price of a base variant of petrol and diesel Venue used to be Rs 125000 in BS-IV. This has increased by Rs 15,000 to Rs 139800 under BS-VI.
Hyundai discontinued the base variant of Elite i20 (Era) making the next variant (Magna) has the entry variant. This change had led to a jump in diesel differential. From a premium of Rs 35,000 under BS-IV the diesel variant of the Elite i20 is priced Rs 121,000 more under BS-VI.
SUV-specialist Mahindra & Mahindra kept a tight control over costs during development of BS-VI upgrade engines. Its XUV300 has seen no increase in the differential. The price premium in diesels was Rs 39,000 under BS-IV and it has remained Rs 39,000 even under BS-VI.
“The diesel demand will witness sharper decline, post transition from BS IV to BS VI due to widening cost differential and narrowing fuel price gap”, said Ashish Modani, Vice President, Co-Head, Corporate Ratings, ICRA.
Other companies have followed Maruti Suzuki in abandoning diesels. Volkswagen has given up sub-2.0 litre diesel engines for India. Its upcoming models including mid-size SUVs will come powered by only petrol engines.
Renault and Nissan, too, have moved away from diesel entirely while Toyota is yet to offer any diesel variants for the sub-Rs 10 lakh category vehicles such as the Yaris and Glanza. It discontinued the Etios and Etios Liva, both of which came with the option of diesel engines.
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