End of the Road for Diesel Cars?

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In a bid to bolster the fight against air pollution, the government earlier this year decided to leapfrog to stringent Bharat Stage VI emission norms to be implemented countrywide by 2020. This means the government has skipped Bharat Stage V norms altogether. Many market analysts have termed this move by the government as aggressive. There has also been clamor from the auto industry regarding the short deadline and high costs in order to comply with these norms.

Diesel vehicles have been portrayed as the problem child in causing pollution. The supreme court in December 2015 banned the registration of new diesel vehicles with a capacity of more than 2000cc in the national capital region and only recently has relaxed the earlier ban. The ban was the result of backlash that diesel vehicles have received, since diesel was treated as the main villain for causing pollution. Diesel car manufacturers thus faced a grim choice in front of them. They had made huge investments to manufacture diesel engines. High cost of development, narrow price gap with its petrol variants and importantly the lack of any consistent long-term policy has resulted in companies shelving their small diesel engine development plans.

Bharat VI norms have been the biggest deterrent for the diesel cars manufacturing companies. Implementation of the stringent norms would mean huge investments in technology for compliance vis a vis doing the same for gasoline vehicles. In a leading financial daily, Mr C V Raman, executive director of engineering at Maruti Suzuki was quoted, he believed that the gap between petrol and diesel variants which is at Rs 1 lakh today might possibly double when the new regulations come to force. Diesel cars, which were an extremely popular choice a few years back, have now witnessed demand tapering even as petrol driven cars continue to make a strong comeback. The market share for diesel vehicles has steadily declined consistently over the years. Also with existing petrol variants reportedly giving a mileage of 23-25km per liter, these cars are on par with their diesel competitors, when the cost of maintenance and higher initial cost of purchase of the diesel cars is taken into consideration.

Some OEM's believe the future will see, small car market to be petrol based while diesel will be preferred for larger cars and sports utility vehicles. The automobile firms thus are not incentivized enough to push forward in the diesel market. The current policy over hang does not augur well for the industry. In the interest of all the stakeholders involved, we think that there is an urgent need for a uniform, clear and consistent long term policy on diesel cars.

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