Production plans of car makers challenged by governments diesel decontrol policy

Thursday 26 April 2012, 18:48 PM by

The repetition of central government’s statement over deregulating the prices of diesel has created a situation of dilemma for the auto makers, since they have found new ways to expand the capacity of diesel engine vehicles. However, the government has not mentioned any details regarding the extension and time period of this decontrol, which has also created a situation of inconvenience for them.

R C Bhargava, Chairman, Maruti Suzuki India Limited (MSIL), said, “We don’t know when this will be implemented. We should be allowed to work in an environment where there is policy certainty. Rules should not be changing everyday.”

Along with MSIL, other manufacturers including Hyundai Motor India limited (HMIL), the largest car exporter of India, are planning to expand the production of their diesel engine cars, since they are followed by a decent demand. Since the price of petrol is around Rs. 26 more than the diesel, the sales figures of petrol cars slipped by 15 per cent, whereas the sales of diesel motor cars rose by 35 per cent.

The officials of MSIL have planned that they will ramp up the production of their diesel cars by 160,000 units, which will result in a final output of 400,000 units per year. Following the league, HMIL has expanded the production of its diesel models of i10 and Verna by 50 per cent, resulting to 10,500 units each month.

Agreeing upon the re-defined policies of government on the terms of removing subsidies from diesel, Bhargava said, “Huge shift towards diesel cars will come to an end. There will be a balance between diesel and petrol cars.”

Pawan Goenka, President, Auto and Farm equipment sector, Mahindra & Mahindra, said that the company is engaged in producing only diesel engine Utility Vehicles (UV) throughout its product portfolio. On the other hand, several industry experts said the auto industry will be not be badly affected even if the prices of diesel is freed up.

Mentioning his views upon the price hike, Neeraj Garg, Director, Passenger Car segment, Volkswagen, said, “Currently it is 70:30 (where diesel and petrol options are available). It is not going to reverse. We have the flexibility to make necessary changes in production.”

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