Diesel To Be Preferred Fuel For SUVs, MUVs Even Post BS-VI

Diesel might lose its share in fuelling the passenger car segment in the near future but the key transportation fuel will continue to dominate the multi-utility and sports utility vehicles in the medium term. Industry watchers opined steep price differential between petrol and diesel vehicles post BS-VI transition which will be more evident in small cars and compact UV segment.

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"In any existing diesel model, introduction of BS-VI engine can be a costly affair which unless justified with volume, may not make good business sense," MG Motor India President and MD Rajeev Chaba said.

Chaba added that MG is committed to provide diesel option to its customers during 2020 and beyond.

The new emission norms will come into force from April 1, 2020.

Last month, passenger car major Maruti Suzuki said it will stop selling all diesel-fuelled cars from April 1, 2020 as new emission norms kick in from next year.

A few days later, Tata Motors said the introduction of BS-VI will make the compliance expensive which will pull down the demand for entry and mid-size diesel models. This trend the company said will not justify the high costs involved in developing a new small capacity engine.

"Entry level car buyers are very price conscious and due to narrowing fuel price gap between diesel and petrol vehicle, break even level for owning a diesel car has already increased over last two years and it will increase further post BS-VI transition," said Ashish Modani, Vice President and Co-Head, Corporate Ratings, ICRA.

The new emission norms will come into force from April 1, 2020.

Last month, passenger car major Maruti Suzuki said it will stop selling all diesel fuelled cars from April 1, 2020 as new emission norms kick in from next year.

A few days later, Tata Motors said the introduction of BS-VI will make the compliance expensive which will pull down the demand for entry and mid-size diesel models. This trend the company said will not justify the high costs involved in developing a new small capacity engine.

"Entry level car buyers are very price conscious and due to narrowing fuel price gap between diesel and petrol vehicle, break even level for owning a diesel car has already increased over last two years and it will increase further post BS-VI transition," said Ashish Modani, Vice President and Co-Head, Corporate Ratings, ICRA.

"Intra-city taxi segment which traditionally runs on diesel is also gradually moving towards CNG vehicle due to lower running cost, thereby further accentuating decline in share of diesel powered small cars."

As per some estimates, personal car buyer having an annual running of 15,000 km does not justify cost economics for owning a diesel vehicle.

According to Rahul Mishra, Principal at A.T. Kearney: "Applications which require higher torque performance will continue to see dominance of diesel engines though petrol engines are slowly catching up with 'Gasoline Direct Injection' (GDI) and 'Turbocharged' technologies which tend to improve torque output of petrol engines."

"However, some of the upcoming diesel technologies may be cleaner and therefore may still find relevance."

Globally, diesel is known to power light and heavy commercial vehicles, mechanised equipment and other heavy vehicles.

Nevertheless, it got popular in India for powering passenger car segment as government subsidied the fuel type for many years.

"Development of diesel passenger cars under the BS-VI regime is having a wide-divide amongst passenger car OEMs," said Sridhar V., Partner with Grant Thornton India.

"While a few including the one with the largest share in the market are not pursuing diesel engines the impact I believe is a clear movement away from diesel especially in the small and compact car segment."

"However diesel is expected to still play a dominant roleon categories of utility vehicles including SUV."