India fast becoming a diesel market

Carmakers in India are fast-tracking their diesel vehicle plans following another price increase in petrol prices, which further accelerated the country’s transition into a diesel fuel market. As petrol prices continue to increase while the government continues to subsidize diesel fuel, consumers are turning to diesel vehicles even if they cost more. Vehicle sales in the country have gone up by 35% during the last fiscal year, while the cost of petrol cars fell by 15% in the same period. After the latest round of petrol price increase, this trend is expected to accelerate. “There is a clear shift towards diesel cars. We are targeting it by increasing our internal diesel engine capacity and also outsourcing some engines from Italian carmaker Fiat,” said Maruti Suzuki Managing Executive Officer (Marketing & Sales) Mayank Pareek. Maruti Suzuki, India’s largest carmaker, is installing a diesel plant, which will be operational by 2013 and will have an initial capacity of 1.5 lakh engines per year. Other car manufacturers are taking the cue: South Korean car maker Hyundai is finalizing plans to build a 400-crore (US$70 million) greenfield diesel plant which will turn out 1.5 lakh engines annually for the Indian market. Ford, Toyota, General Motors and Volkswagen have begun to expand their diesel portfolio. “Diesel is expected to play a critical role to simulate demand,” said Sandeep Singh, Toyota Kirloskar Motor Deputy Managing Director (Marketing). “We are pegging 75 percent of our total output for diesel vehicles to meet the exponential demand from this fuel.” As some carmakers scramble to roll out more diesel models, they are also considering offering promotions and special campaigns to boost the sales of petrol cars. Hyundai recently announced a “petrol price lock assurance program” which the company said will insulate its customers from petrol price hikes for the next seven months. The program covers customers who will buy petrol models of the Eon, Santro, i10, i20, Accent and Verna till May 31. (May 26, 2012)