Diesel sale volumes slumps after a massive boost dues to slow economic growth

The long waiting period of diesel cars is now a thing of past, along with their low inventories. With eight out of the twelve of the top selling diesel cars available for take-away at the dealership itself, the impact of slow market growth is visible on diesel car sales also. The passenger car market, which was already limping, was hurt further by the 5-6 per cent increase in the cost of the cars after the 2012 Union Budget and the increase in road taxes. This came at the heels of increase in diesel car production by car makers like Ford, Hyundai and Maruti Suzuki.

President and Managing Director, Ford India, Michael Boneham, said, "The market environment is tough. Almost all manufacturers have free availability of diesel vehicles, and the waiting lists for some have come down significantly.” He added, "In some cases, incentives are being doled out on diesel cars also.”

Some of the diesel variants which are available off the shelf are Maruti Suzuki Swift, Hyundai i20, Toyota Etios, Volkswagen Polo and Vento, and Mahindra Scorpio and Bolero. The waiting period for Maruti's bestselling Swift DZire and Hyundai Verna has reduced by one or two months, varying as per the location, from the earlier four to six months. However, Mahindra XUV 500 and Maruti Suzuki Ertiga remained unaffected and still command high waiting period of 3-6 months. Over the last year, due to the price gap between petrol and diesel touching more than Rs. 30 per litre, the sales of diesel cars rocketed above. Since then, the on-road price of the cars have been hiked by Rs. 30,000 to Rs. 1 lac in last 3 months and the purchases are being delayed by the potential customers at the time of delivery.

Over the last three to six months, car makers have adjusted their production capacity to manufacture more diesel cars in the wake of the fact that the excise duty on diesel cars was not raised. A USD 72 million investment was made by Ford India to increase its production capacity by 80,000 units in the beginning of 2012. Other companies which followed in its footsteps included Hyundai India, which increased its capacity by 50 per cent, and Maruti Suzuki, which signed an agreement to source an additional 1,00,000 diesel motors from Ford.

Vice President (VP), corporate affairs, GM India, P. Balendran, said, "Although the price difference between petrol and diesel is about Rs. 34 a litre, the demand for diesel cars have not picked up.” He added, “The market remains depressed because of high interest rates, inflation and negative sentiment.”

According to Deputy Managing Director, Marketing, Toyota Kirloskar, Sandeep Singh, there has been a major paradigm shift in the market over the past few months and Etios diesel variant is available off the shelve now. He said, "Its not only the price increase because of excise duty alone but even the on road price of vehicles have also gone up due to increasing road taxes, that has hit the demand hard. The enquiry levels have gone down be it on petrol or diesel.”

Future investments in automotive industry and the industry itself will be in a lurch if the speculations regarding possible hike on diesel cars by the government materialises. Managing Director, Skoda Auto India, Sudhir Rao, said, "The overall economic condition is hurting the auto industry and it is limiting its growth potential and the impact is not limited to petrol alone. We hope the policy uncertainty will be cleared soon, before it creates a major problem."