June 27, 2020
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Bucking The Trend: Diesel Cars May Go Up In Smoke But How Will That Curb Pollution?

Maruti may phase out small diesel cars but India's bizarre fuel emission policy to jump straight from Euro 4 to Euro 6 will do little to check pollution. Why not incentivise hybrid cars?

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Bucking The Trend: Diesel Cars May Go Up In Smoke But How Will That Curb Pollution?
Photograph by Suresh K. Pandey
Bucking The Trend: Diesel Cars May Go Up In Smoke But How Will That Curb Pollution?

Last month, Maruti Suzuki, ­India’s largest carmaker, drop­ped a bombshell in the market. It ­announced that it will stop making small diesel cars from next year. ­Immediately, it puts a big question mark on the future of the company’s bestsellers—diesel-only cars like the Brezza and the S-Cross.

The company’s announcement of not upgrading its small diesel cars to BS6 norms—which means a complete drop out of the segment from April 2020—came as a surprise to the automobile ind­ustry. At its peak in 2016-17, diesel cars accounted for 31 per cent of Maruti Suzuki’s sales, which have since then dipped to 26 per cent.  Maruti Suzuki reg­istered its highest ever sales of 18.62 lakh units in 2018-19 as against 17.79 lakh units the previous year.

Announcing the decision to not upg­rade the company’s small diesel car range to BS6 norms, R.C. Bhargava, chairman, Maruti Suzuki India Limi­ted, had exp­lained that “upgrading small diesel eng­ines to BS6 emission regulations may result in substantial increase in the cost of the cars, making them unviable for customers”. Maruti Suzuki estimates that the cost difference between a BS6 petrol variant and BS6 diesel variant will widen further to around Rs 2.5 lakh from the present Rs 1-1.5 lakh.

“With such a large gap in prices, customers are likely to favour petrol variants over a BS6 diesel vehicle. This will be espec­ially true for small diesel engine cars owing to their higher sensitivity towa­rds prices,” a spokesperson for Maruti Suzuki told Outlook.

India’s keenness to tackle emission and keep abreast of European norms was ­behind the government decision to adva­nce adoption of BS6 norms four years ahead of the earlier schedule, to April 1 next year. BS6 fuels will have sulphur content of 10 ppm compared to the existing level of 50 ppm—a resounding 80 per cent reduction that makes these fuels extremely clean. As per government plans, BS6 fuels would be supplied through 1,630 outlets of the three oil marketing companies—IOC, BPC and HPC—in Delhi-NCR beginning October 1 this year, while supply across the rest of India will commence from April 1, 2020.

“Everyone was talking about how prices of diesel vehicles will shoot up with the implementation of the BS6 norms from April 1, 2020. Even then, Maruti’s move came as a surprise for the entire industry. Since Maruti is the market leader, the general trend is that other players in the industry will follow suit,” says Saharsh Damani, CEO, Federation of Automobile Dealers’ Association (FADA)

As in the case of Maruti Suzuki, diesel cars across the industry have been witnessing a decline in sales over the last several months. From a 47 per cent share in sales in 2012-13, it dipped to 23 per cent in the 2017-18 fiscal year, according to a FADA study. “The biggest dip is in the hatchback and sedan segments. The main reasons for this dip are the narrowing price gap between petrol and diesel fuel rate, frequent action and ban on diesel engine cars (specially in Delhi-NCR) and a lower registration period for diesel (10 years) against 15 years for petrol vehicles in cities such as Delhi,” says Damani.

Jagdish Khattar, former managing director of Maruti Suzuki India Ltd, points out that there are very few automobile manufacturers producing small or compact diesel cars in India besides Maruti. The others include Tata, Hyundai and Renault. There is already speculation that the Tatas are likely to follow suit and phase out their diesel cars with 1.2 and 1.3 litre capacity. The others have not revealed any plans so far of stopping production of small diesel cars.

“By and large, small compact diesel cars are on their way out because of their cost of production. But bigger cars may conti­nue. Automakers like Mercedes have no issue as their engines already meet higher fuel standards. Maybe the engines of cars they are selling in India are already as advanced as to meet Euro norms as they are impo­rted from Europe where the norms are already in place, so the development costs have already been incur­red by them,” says Khattar, adding that for companies like Maruti, meeting the new norms is like a greenfield project.

Constant policy changes by the government and the courts have also discouraged diesel cars. Today, people with eight-year old diesel cars in NCR can be seen running around trying to dispose them as soon as possible so as not to be caught with a ten-year-old car that won’t be allowed on the road.

“Nowhere in the world has any country tried to jump straight from Euro 4 to Euro 6 as has been pushed in India. Euro 6 was to come only in 2024 and Euro 5 next year, but India has advanced everything to keep up with the global trend,” says Khattar.

Jnaneswar Sen, partner, Maven Part­ners LLP, and a former marketing head for Honda Motors India, points out that in developed countries small diesel cars are quite rare and don’t have a big market. “Only in Europe diesel cars acc­ounted for almost 50 per cent of the vehicles on the road. But after the Volkswagon emissions scandal, even the European market is shifting more tow­ards petrol cars,” says Sen. The 2015 scandal, aka ‘diesel dupe’, had the German car giant admitting to cheating emmissions tests in the US.

He points out that from the emission perspective, diesel is much better than petrol. “If somebody wants to meet the CAFE (Cor­porate Average Fuel Efficiency related to CO2 emissions) norm, they should look to sell more diesel cars which may only be possible if they cross subsidise diesel,” states Sen, adding that bigger diesel cars with their better mileage and better torque will continue to att­ract buyers.

P. Balendran, executive director, MG Motor India, states that diesel cars make sense only if daily usage is more. “In any case, the future is steering towards environment-friendly mobility solutions and both OEMs and consumers tend to move to new technology,” says Balendran. He reveals that his company is ready with a diesel engine for its first offe­ring—the ‘MG Hector’, which will be launched in June. The car will also sport petrol and hybrid versions. The hybrid version, to be reve­aled at the MG Hector’s unveiling in Mumbai this month, is a very fuel-efficient engine whose mileage is close to a diesel car, he claims.

Even as India seeks to cut fuel emissions to curb deepening pollution in the cities with new BS6 norm for fuels and consequently vehicles, some questions remain unanswered. What difference will a Euro 6 car make if they constitute only two or even five per cent of the cars on roads as their benefit will be eroded by all the existing old polluting cars? India still lacks a policy for scrapping old polluting cars. Another query by auto experts is: why is the country looking at promoting electric cars and not incentivising hybrid cars. Almost 20 year after the introduction of CNG vehicles, not even 20 per cent of the country has the infrastructure in place to promote these ­environment-friendly cars.

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