Rising fuel cost: Consumers prefer diesel cars, cos increase production

[suguhopes]

MUMBAI: Consumers have begun opting for diesel versions of popular car
models in the wake of rising fuel costs, forcing carmakers to step up
production of the diesel variants in recent months. The Indian car
market, which grew 8% last year, comprises largely petrol-driven cars,
which also bring in higher business margins.

Maruti Suzuki’s fast movers Swift and Dzire are selling 65% diesel
variants and others like Tata Motors, M&M, GM, Hyundai and Ford are
jacking up production of the diesel models. Tata’s Indica and Indigo,
Mahindra’s Logan, GM’s Optra and Hyundai Verna and Sonata are seeing
an increase in diesel model sales in recent months.

The trend towards diesel models is forcing Maruti Suzuki to launch the
diesel and the petrol variant of the Splash hatchback and is
understood to be jacking up production of its diesel engine plant to
three lakh units from one lakh units. Although company officials deny
the move, sources indicate that the Japanese car major is working with
Fiat on a smaller engine to power its B segment cars like Alto, Wagon
R, Zen Estilo.

The Swift and Dzire diesel variants are powered by the 1.3 litre
Fiat’s multi-jet diesel engines. Maruti Suzki did not have any
manufacturing unit for diesel engines earlier, but they did
manufacture diesel versions of Maruti Zen and Maruti Esteem, using
imported engines from Peugeot.

Tata Motors now has the most affordable diesel car in the Indian market
—Indica and Indigo. More than 75% of these two models sell the diesel
variants. Making diesel engines is an important part of Korean major
Hyundai’s vision, looking at the ever-rising prices of petrol in the
local market. More than 65% of Verna and Sonata sales come from the
diesel variant. However, “we are looking at offering the Santro and
Accent models with CNG and LPG to counter any competition”, said
Hyundai Motor India senior V-P (marketing and sales) Arvind Saxena.

Diesel technology is getting much superior more environment-friendly.
This is forcing car manufacturers, who do not have the technology, to
start looking at alternative solutions, says GM India V-P Ankush
Arora.

N.Sukumar
Research Analyst