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Monday, December 16, 2019

Maruti makes it official: No diesel cars from 2020

Industry experts and company sources said that the company’s decision to stop sales of diesel cars is in line with the mandatory upgrade for auto makers from BS-IV to BS-VI beginning April 1, 2020.

By: ENS Economic Bureau | New Delhi | Updated: April 26, 2019 6:54:06 am
Maruti Suzuki, Maruti Suzuki India, WagonR, New model WagonR, Maruti, maruti new model, new WagonR, business news, indian express news. R C Bhargava, chairman MSIL, told at a press conference in Delhi, while announcing the fourth quarter results of the company.

Bringing an end to a segment that accounts for almost a quarter of its total sales, Maruti Suzuki announced Thursday that it will stop selling diesel cars next year.

“From April 1, 2020, we will have no diesel car on sale. Depending on how customers react… if we find there is a market for diesel cars (after the new emission norms kick in) we will develop it in a reasonable amount of time,” R C Bhargava, chairman MSIL, told reporters at a press conference in Delhi, while announcing the fourth quarter results of the company.

Explained

Rising costs, pollution worry

Amid mounting technology costs and pollution concerns, Maruti Suzuki, with a market share of over 51% in the Indian passenger car sector, is the first company to make its decision public. With new emission norms coming into force from April 2020, it will double the price gap between diesel and petrol in the price-sensitive market. How other manufacturers respond is to be seen.

MSIL has seven cars that have diesel variants — Swift, Dzire, Baleno, Vitara Brezza, Ertiga, Ciaz and S-cross — and together they account for over 23 per cent of the domestic passenger car sales of the company.

Industry experts and company sources said that the company’s decision to stop sales of diesel cars is in line with the mandatory upgrade for automakers from BS-IV to BS-VI beginning April 1, 2020. In the wake of rising pollution levels, the Supreme Court had said that March 31, 2020, would be the last date for the registration of BS-IV compliant vehicles.

BS-VI norms require car makers to invest heavily in upgrading their technology.

Industry sources said that BS-VI compliant diesel cars will double the current price gap between petrol and diesel variant of a car. A source confirmed that while currently, the diesel variant of a car is costlier by Rs 1 lakh to Rs 1.25 lakh to the petrol variant of the same car, the difference between a diesel and petrol car will go up by at least Rs 2 lakh.

Read | Maruti Suzuki’s net drops 5 per cent at Rs 1,795 crore

“As the price gap increases between petrol and diesel cars, customers are expected to move away from diesel. Besides, there is a global consumer and manufacturer shift away from diesel cars,” said the source. The source also pointed at the reducing gap between petrol and diesel prices in the country which was a big draw for diesel cars earlier.

The same day, MSIL reported a 4.6 per cent decline in net profit in the fourth quarter FY-19 and shares of the company closed with a fall of 1.7 per cent. Shares of MSIL that had risen to a day’s high of Rs 7,145 per share fell up to 3.9 per cent to hit a day’s low of Rs 6,865 before recovering to close at Rs 6,902. The company also forecasted a weak rate of growth of 4-8 per cent for the current fiscal year and attributed it to uncertain fuel prices and the onset of stricter emission norms.

Maruti’s decision is not in isolation. Various auto manufacturers across the world have announced similar decisions to stop sales of diesel cars. In 2018, Volvo said that it will not launch another diesel model. Other major players such as Toyota, Fiat Chrysler and Nissan have also announced they will phase out diesel cars in many countries.

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