Diesel Car Sales in India Drop to Less Than 14% in Past 3 Months

Shift to BS-6 emission norms, higher fuel prices and short ownership tenures are leading to buyers avoiding diesel.

Diesel is almost a bad word in the industry now. Buyers are clearly shying away from buying diesel cars, except where they have no choice (where models are diesel only). And the slump is sales in diesel cars is mainly due to legislation.

Accordingt to SIAM data, sales of diesel cars have dropped to less than 14 percent of total sales in the April to June 2019 period. A year ago, 39 percent of cars sold were diesel in the April to June quarter. Car sales have anyway been falling over the past year, but diesel car sales are slowing down even more.

What brought this on? A combination of factors, mainly led by legislation.

Small Diesel Car Sales Will Slow Down

The National Green Tribunal has ruled that diesel cars over 10 years of age cannot ply in the Delhi-NCR region in a bid to control particulate matter emissions. This ruling may permeate to other states soon. That has led to a drop in diesel car sales in one of the largest markets in the country.

Then there’s the shift to BS-6 emissions standards from the current BS-4 standards. While the costs involved in moving petrol vehicles to BS-6 standards isn’t that high, for diesel it is quite expensive.

Parts such as diesel particulate filters, new exhaust systems, hardware and software would mean that the purchase price of a diesel car would be significantly higher than a petrol car, at least 25 percent more. For small diesel cars this doesn’t make sense. Maruti Suzuki, the country’s largest carmaker, announced that it will be phasing out most of its diesels by April 2020.

And then there’s fuel cost – the price difference between a litre of petrol and a litre of diesel has come down to just Rs 5 a litre, compared to nearly Rs 21 a few years ago. For small car buyers, the additional 25 percent on the purchase price of a diesel car isn’t worth it.

But Sales May Spurt Ahead of April 2020

However, there is a silver lining in sight. And this could give the entire auto industry some hope, at least in terms of sales numbers.

With unsold inventory piling up at dealer stockyards, car manufacturers are cutting production to regulate supply. Most of the vehicles produced are BS-4 compliant at the moment, except for a few that have already moved to BS-6. But by April 2020, all cars will have to be BS-6 compliant.

Industry watchers believe that there would be a spurt in buying of unsold BS-4 stock ahead of the change to BS-6 by bargain hunters. This could push up sales numbers at least for a short while in the third and fourth quarters of the year.