Apex Court Order Dents Diesel Vehicle Demand, Sales Fall 7.3% in Jan-Feb
Share of diesel vehicles in overall passenger vehicle sales shrank to 42% in first 2 months of this year from 45% in year-ago period
timesinternet.in New Delhi: The Supreme Court order banning the registration of vehicles with diesel engines displacing 2 litres and more may cover only the National Capital region, but its impact on buyer sentiment is country-wide, say industry executives.
Sales of petrol cars and SUVs in January–February 2016 grew 7% from a year earlier, whereas those of diesel-driven personal vehicles fell 7.3%, industry sources said, citing the ban announced in December and the narrowed gap between the prices of the two fuels as the key reasons. The share of diesel vehicles in overall passenger vehicle sales shrank to 42% in the first two months of this year from 45% in the year-earlier period.
“Diesel passenger vehicles have suffered a double-edged attack, first because of the shrinking gap between petrol and diesel prices … (and) then the SC ruling,” a top executive at a car maker told ET.
About 4 lakh units of diesel vehicles with 2-litre or heavier engines are sold in the country annually, industry experts said. The NCR comprising Delhi and its satellite cities is the biggest automobile market, and absorbs 5-8% of this diesel vehicle supply. Across India, M&M has a more than 50% share of the market for diesel-run vehicles displacing 2 litres or mo-
re, while Toyota has about 20% and Tata Motors less than 5%. The ban was to end on Thursday, but the court extended it until further orders. This and the suggestion of an environmental compensation charge on diesel vehicles have worried auto makers at a time when the market has returned to sluggishness after showing some promise. They are unhappy also with the budget announcement to impose an infrastructure cess, where too diesel vehicles attract a higher levy than petrol.
The court order has impacted the sale of even smaller diesel cars as uncertainty and anxiety prevails, said Jnanesh- war Sen, senior vice president of sales and marketing at Honda Cars India.
His counterpart at Hyundai Motor India, Rakesh Srivastava, sought consistency on policies covering the sector, and said: “The contribution of diesel vehicle to overall industry volume is on the decrease … uncertainties on registration have led to lack of customer confidence.”
To be sure, sales of diesel vehicles have been on the decline even before the court imposed the ban in NCR to test its impact on the quality of air. In the financial year ended in March 2015, diesel car sales dropped 5.7% from the previous year, while those of petrol cars rose 12.35%. Diesel has been increasingly moving out of the radar of Indian buyers ever since the government removed subsidy on the fuel, reducing the price gap with petrol. Now, with buyer preference again shifting to petrol and authorities discouraging the sale of diesel vehicles, the most impacted are luxury brands such as Mercedes-Benz, BMW and Audi. Mahindra and Toyota are also at the receiving end. These companies are reworking on production and supply strategies. “We have adjusted the engine mix to meet the petrol demand in Delhi-NCR, which includes higher allocation of petrol models,” said Joe King, head of Audi India.