Maruti Suzuki India Ltd., the country’s leading passenger vehicle manufacturer by a huge margin, recently announced that it will withdraw all diesel variants of its product portfolio from 1st of April 2020 (deadline for BS-VI emission standards). The implication of this announcement appears to be quite significant considering that the automaker has invested heavily on diesel engine plants and has introduced a brand new 1.5-liter diesel engine very recently. Moreover, 23% of Maruti’s sales in 2018 came from diesel models.
However, speaking to PTI, Ajay Seth, CFO, Maruti Suzuki India Ltd., stated that 99% of diesel engine production capacity is being converted (into petrol, CNG, etc) and hence the overall loss due to ditching diesel engines is going to be negligible.
Maruti has invested heavily on the new 1.5-liter diesel engine project (Rs 1,000 crore) which was supposed to replace the long-standing 1.3-liter DDiS (Fiat Multijet) unit. However, when the Indian government decided to jump from BS4 emission norms to BS6 directly, things became very challenging.
Making the new compact diesel engine meet the stringent BS-VI standards would mean a lot of additional components such as diesel particulate filters, more sophisticated catalytic converters, and significant redesign of several components and sub-systems like EGR (Exhaust Gas Re-circulation) system.
Net result will be a price hike of diesel engined models to a level so substantial that it will no longer be viable, especially in the small car segments that Maruti specializes in. Maruti would be better off focusing its resources on introducing CNG, hybrid and electric variants of its popular models as alternatives to diesel variants.
A petrol hybrid powertrain not only offers fuel efficiency comparable to that of a diesel engine which is in the same performance ballpark but it will also enjoy subsidy under the government’s FAME-II scheme (Faster Adoption and Manufacture of hybrid and Electric vehicles) for the commercial segment (which are the majority buyers of diesel entry level cars). Moreover, the government’s push to increase the CNG distribution infrastructure (promise made to setup 10k CNG stations by 2028), would popularize the CNG variants, which again offer similar mileage like diesel engine. So, shunning diesel engines wouldn’t cripple Maruti.
With the industry leader denouncing diesel engines, we believe that it is only a matter of time before other OEMs follow suit. This move by Maruti could be the turning point in the country’s nascent electric vehicle market.
