Running on diesel: How SC’s green order will impact auto sector

  • Suveen Sinha, Hindustan Times, New Delhi
  • Updated: Dec 16, 2015 19:22 IST
Vehicular emissions are one of the major causes of air pollution in Delhi. (File photo)

“Why don’t they ban cigarettes?” asked the fellow at the other end of the phone line. He was incensed by the ban on diesel cars in the National Capital Region.

To tell you the truth, a ban on cigarettes should cause less heartburn among the manufacturers, although it will raze them to the ground. At least, in the case of the cigarette the government did not promote its manufacture, it just benefited by milking it for revenue.

In the case of diesel cars, the government pretty much supported them through its taxation and subsidy policies. Diesel prices were kept artificially low even as petrol shot up. This despite the NDA government’s vow, at the turn of the century, to do away with what was called the administrative pricing mechanism.

That vow made some carmakers live in hope. Maruti Suzuki stayed loyal to its petrol gene, as did Honda. But they saw the market move away from them, towards the diesel guys like Hyundai, which brought in modern diesel technology, Tata Motors, which made the most of its old and new technologies, Mahindra & Mahindra, and, in comparatively smaller volumes, Toyota.

Read: No new diesel vehicles of over 2000cc in Delhi till March 31: SC

Maruti went to the extent of launching a multi-utility vehicle, akin to a minivan, called Versa, but fitting it with a petrol engine. It flopped despite having Amitabh Bachchan and son Abhishek as brand ambassadors. Finally, the company spent big money on setting up factory lines for diesel engine at Manesar. The Swift was the first Maruti to have a diesel heart, and it flew off the showrooms.

So did the Honda City, when it finally acquired a diesel plant, even though it was a Johnny Come Lately. General Motors, which has struggled in India for market share ever since it came in the middle of the 1990s, found sizeable purchase for its diesel variants. Of course, it bent its back by fitting even the tiny Beat with a diesel heart.

Indian buyers simply flocked to diesel. And no one should be surprised by that.

There was a television commercial by Maruti a few years ago that showed an Indian army officer evaluating a tank. It ended with the officer asking: “Kitna deti hai?” How much does it give? How many kilometres to a litre?

The commerce touched a chord. That is the Indian consumer – obsessed with fuel economy, even while spending a fortune on buying the vehicle, and not necessarily looking to milk it for kilometres. Mercedes and BMW buyers, too, are understood to care about it.

It may not make much sense, unless you are a fleet operator, or someone who drives at least 100 kilometres a day. But then, didn’t they always tell you that cars were not rational purchases? Some are attracted to the driving pleasure, some to the statement they make, some to the engineering – we Indians just love fuel economy.

On that count, petrol does not stand a chance against diesel. Not only is diesel cheaper than petrol, despite the price deregulation, diesel engines, having evolved considerably over the years, also run more kilometres to the litre. The situation is such that the Indian buyer does not mind shelling out more at the time of purchase and is willing to live with higher maintenance costs.

That’s why you see all the newer capacities – such as Volkswagen’s, or the new investments by older companies – being set up with a heavy presence of diesel. Time was when as much as 60% of car sales were diesel models. That was the time the fuel became Rs 25 – more in some states – cheaper per litre than. The gap has narrowed now, and the diesel-petrol break-up of sales volumes is more like 50-50 now, some estimates say 45-55.

But in the case of some companies, diesel is the backbone. Ask Mahindra & Mahindra, which rides on the back of the Bolero, Scorpio, XUV and other diesel warriors. Or Toyota, whose mainstays are the Innova, the extremely popular diesel MUV, and the SUV Fortuner. The diesel Corolla, too, seems to have proliferated.

A ban on diesel vehicles -- the National Green Tribunal and Supreme Court orders have covered pretty much all kinds, at least for now -- will make car companies cry all the way in a direction far away from the bank. It’s not just about the Delhi-NCR region being a big market, it is also about how it might turn the sentiment against the fuel. It will be a legitimate wonder: it’s Delhi today, why can’t it be Mumbai or Bengaluru tomorrow? Neither city can lay claim to being the cleanest.

Now that there is a clear turn of sentiment against diesel, what happens to the companies that spent big money for capturing that market? Will they be merely listed as collateral damage in the war against pollution? Maybe. Among the many words chosen to describe public policy, capricious would be quite common.

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