Maruti Suzuki may beat Tata Motors to India’s first 800cc diesel car

Mini cars account for 21% share of India's market but does not offer choice for diesel.

With Tata Motors’ plan to launch a Nano diesel yet to come to fruition,Maruti Suzuki India may get a head start by being the first to offer a diesel engine option in the lucrative micro/mini car segment. In 2014,Maruti’s new global small car (code: YL7) will be the first model to offer parent Suzukis self-developed 2-cylinder 800-cc diesel powerplant,multiple sources close to the development told FE. This could make the YL7,a replacement of both the A-Star and Zen Estilo,the smallest and cheapest car in the country,available with a diesel engine option.

At a time when demand is sluggish,the move is seen as key to unlocking increased volumes in the entry segment. Mini cars today have an over 21% share of India’s 2.7 million passenger vehicle market,but the segment does not offer diesel engines.

The diesel engine plan is on the speed lane for Maruti. While the petrol model of the YL7 will be launched first around the Auto Expo,the start of production for the diesel variant is for later part of the year. The YL7 will be exported from India to various markets and,in some,will also be sold as the new Alto, a source close to the development said.

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A senior Maruti official confirmed the developments,but requested anonymity. When contacted,a company spokesperson added,We do not comment on our future models.

Marutis YL7 small car will first be launched with a 1-litre petrol engine in January-March,2014,with the 800cc diesel version coming in by around December the same year. It will target a fuel efficiency of around 30 kmpl. Among rivals,Tata Motors’ development of an 800cc diesel version of the Nano micro car has reportedly run into delays,though Hyundai will launch a 1.1-litre diesel engine in a new small car in the next few months itself. The smallest diesel engine in the country today is available in the Chevrolet Beat (996 cc). Interestingly,German auto supplier Bosch is developing the Engine Management System for both Tata and Maruti’s 800cc diesel engine.

Besides the launch of the YL7,2014 will also see Maruti launch a new sedan (code: YL1) replacing the SX4,followed by a compact SUV (code: YAD) in the same year. The increased activity planned for 2014 is in stark contrast to the current year (2013),when no new product launches are due,but only variations like a more premium Sting Ray version of the WagonR.

Till now,Maruti’s diesel model range has been limited to using different variants of the Fiat-sourced 1.3-litre diesel engine,which it manufactures under licence but cannot make significant changes to. While the Fiat diesel engine is used across the Swift,Dzire,Ertiga,Ritz and SX4 models,development of Suzuki’s own 800cc diesel engine will give it an option to offer diesel options in other high-volume small cars like the WagonR. Suzuki is also reported to be developing two more diesel engines in-house for use in bigger models a 1.2- and a 1.4-litre version.

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An entry diesel option is significant for Maruti,which is looking to rapidly increase volumes and improve capacity utilisation,especially with expansion plans kicking in just around the corner. Maruti currently has a capacity to manufacture about 12 lakh cars annually at its Manesar and Gurgaon plants,but the addition of a new line at Manesar will take this up to 15 lakh by the end of this year. By 2015-16,capacity is expected to touch around 20 lakh units,with a new third facility at Gujarat.

For the last two years,volume growth has been slower than expansion plans,leading to inventory pile-ups Maruti’s domestic volumes in FY13 went up 4.44% to 10.51 lakh units,but in April-July FY14 sales fell 4.1% at 3.20 lakh units. As per the company’s estimates,FY14 growth should touch 4-6%. Maruti shares at the BSE closed 0.58% up at R1,345 on Monday.