Petrol-Run Cars Outselling Diesel Variants In India, Thanks To Narrow Margin Between The Fuels

NEW DELHI: Indian consumers are shifting back to petrol-run passenger vehicles that are set to start outselling diesel variants again after two years, boosted by falling petrol prices and the narrowing price gap between the two fuels. The changing demand trend amid a turnaround in the auto market is making manufacturers rework their production schedule in the run-up to the festival season when sales spike up. Diesel cars have enjoyed a smooth run for more than two years as the fuel costs less than petrol and offers better mileage, making such vehicles a preferred choice for India’s cost-conscious buyers.

That is fast changing with the government phasing out diesel subsidy and petrol, which is deregulated since June 2010, getting cheaper. Diesel is nearly 14% costlier now than a year earlier, while petrol has become a bit cheaper year-over-year. The trend in the automobile market is quite pronounced on some models.

When Honda Cars India launched its compact sedan Amaze in 2013, the local unit of the Japanese major found 80% of the buyers going for the diesel version. The Amaze was Honda’s first diesel offering in India and was launched to meet the then growing demand for cars that run on diesel.

However, last month, just a little over half the buyers for Amaze chose a diesel variant. “Customers are now more educated over their needs and are not going blindly for diesel cars any longer,” said Jnaneshwar Sen, head for marketing and sales. Honda witnessed a similar trend for the new City, with just 50% of buyers preferring diesel in July compared with 70% at the time the mid-size sedan was launched in January this year.

According to executives at car manufacturers that ET spoke to, the festival season that commences next month looks perfect for petrol cars to capture lost ground as the overall market is also on a recovery path with domestic sales recording three straight months of growth. They expect shift of customer preference for conventionally wiser petrol – maintenance cost of petrol cars is usually lower and fuel is more environment friendly – to continue, and are accordingly adjusting their strategies.

Maruti Suzuki, the country’s largest carmaker, has shelved plans for a new diesel engine plant at Gurgaon and is concentrating on its petrol models as it strives for higher market share. “While diesel car sales have declined 7%, sales of petrol cars have grown by almost 11% in the past few months,” said a senior executive. “Enquiries on and sales of petrol models have jumped in recent months.”


Companies aren’t just altering production plans, but also offering petrol variants at aggressive price to tap the shift. “Customers are increasingly going towards petrol and keeping the same trend in mind, we aggressively priced the new car with the intention to increase the share in the premium hatchback segment,” said Hyundai’s head for marketing and sales, Rakesh Srivastava. The company has invested $600 million in a hybrid engine manufacturing plant capable of producing both petrol and diesel engines on the same line to tackle shifting demand in the Indian market.

Overall ownership cost of diesel-fired vehicles has gone up, said Amit Kaushik, principal analyst, autos, at consultancy firm IHS Automotive. Car companies are vying on the government policy that is further likely to dampen demand for diesel cars.

Price gap between the two fuels now stands at just Rs 12 and may further close in coming months because of government strategy of increasing diesel price by 50 paise every month until it aligns with market rates.