Diesel car sales to 26% in four years in India

India: The sales of diesel run passenger car has declined from 52% in 2012 to 26% in 2016. The narrowing gap in retail prices of petrol and diesel has been one of the key reasons behind this decline. A recent ban on diesel engines, with capacities above 2,000cc, in Delhi-NCR, imposed by the Supreme is another vital reason for the downfall in the sales of diesel cars.

As per May 2016, diesel cars accounted for around 26% of total car sales. Sugato Sen, deputy DG at Society of Indian Automobile Manufacturers (SIAM) said, “This is quite a fall, considering that the contribution of diesel variants was as high as 52% just four years back.”

With the government’s decision to de-regulate fuel prices, the subsidies on diesel have been removed. In Delhi, the price gap between the two fuels has reduced from INR27.2 in July 2012 to INR10 in July 2016. This has also tapered the per-kilometre running cost between petrol and diesel variants, which reduced from INR2.72 in 2012 to INR1.75. For instance, if we consider the fuel efficiency of a petrol-based hatchback to be 14 kmpl and that of a diesel variant to be 19 kmpl; per kilometre cost for petrol-based car has declined from INR4.62 in 2016 from INR4.89 in 2012. On the other hand, per kilometre running cost for diesel variant has inclined from INR2.17 to INR2.87 in 2016.

“In spite of the highly evolved diesel technology, the car market is witnessing a preferential shift towards petrol (variants) with narrowing of price differential between petrol and diesel fuels," says Rakesh Srivastava, Senior VP (Sales & Marketing) at Hyundai India. Honda has seen a sharp slide in sales. Jnaneswar Sen, Senior VP (Sales & Marketing) for Honda Car India said, "The consumer sentiment has changed sharply and we could see an immediate drop in enquiries (for diesel variants) at dealership”

According to a recent report published by TechSci Research, “India Automotive Spark Plug Market Forecast and Opportunities, 2021’’, there has been a rising demand for automotive spark plugs in India over the last few years. The rise in spark plug demand can be attributed to growing automotive industry, continuously expanding petrol based vehicle fleet size, increasing passenger car and two-wheeler sales and rising purchasing power of consumers. Moreover, continuous government support in the form of various initiatives such as National Automotive Testing and R&D Infrastructure Project (NATRiP), Focus Market Scheme (FMS), Automotive Mission Plan 2006-2016, National Electric Mobility Mission Plan (NEMMP) 2020, Make in India Program, etc., are anticipated to underpin growth in the country’s automotive spark plugs market in the ensuing years.

TechSci Research is of the view that after the government's decision to de-control fuel prices, the subsidy on diesel has been withdrawn, leading to narrowing gap in retail fuel prices of petrol and diesel, which has been one of the most significant reasons behind this declining trend. Also, this would enhance the sales of petrol based passenger cars in the country, in turn boosting the demand for automotive spark plugs, during the forecast period.