There’s evidently a noose hanging around the diesel-sipping cars apparent from its fast dropping market share. The major factors that have been instrumental in the decreasing popularity of diesel cars in India are assessed here.

Reducing price gap between petrol and diesel
The demand for diesel vehicles has been on the wane in the local market since the fuel was deregulated by the government in 2014. The price gap between petrol and diesel has gradually narrowed down to around Rs 8 at present (petrol Rs 77.61/diesel Rs 68.19 as on 3.12.2019 in Kolkata).

With the rising price of diesel, the graph of diesel car sales from the peak of 47% in 2012-13 has tumbled to 19% in 2018-19. Even in the SUV segment – the strong diesel bastion, the share of diesel models has declined from 98% in 2012 to 83% in 2018-19.

The price gap between petrol and diesel is predicted to narrow down further, pulling the share of diesel vehicles in the overall passenger vehicle market to crash in the near future.

Rise in price of diesel cars
New pollution control standards will require more complex and sophisticated emission control systems: High pressure common rail direct injection system, selective catalytic reducing system for nitrogen oxide (NOx) control, exhaust gas recirculation system, turbo charger, advance on-board diagnostic system, lean NOx trap, etc. While packaging these expensive and complex technical solutions in small to mid-size cars is technically feasible, high cost and concerns around long term and durable on-road performance will pose a serious challenge.

V G Ramakrishnan, Managing Partner at Avanteum Advisors LLP explained that prices of diesel vehicles in the hatchback segment are likely to go up by 20-25% post implementation of BS-VI norms. The break-even period for purchasing a diesel vehicle would increase by 2.5-3 years, negating the benefits of increased mileage that the fuel currently offers. “It will not make economic sense for consumers at the entry-level to purchase diesel vehicles. Diesel would continue to find favour among buyers for premium sports utility vehicles where the percentage of vehicle price increase on account on BS-VI would be less than 10%,” he informed.

As commented by Shashank Srivastava, Executive Director, Maruti Suzuki India, “To convert a BS-IV to a BS-VI vehicle in diesel is expensive. Already there is a difference between a diesel and petrol car of about a lakh and twenty thousand. Added to it is another big cost causing the gap to widen further. So much so that the price sensitive consumer in the smaller car segment is likely to reject it.”

Upcoming pollution checks
‘Diesel-gate’ by Volkswagen in Europe has exposed the technical manipulation of a wide gap between emissions-from-cars measured certification in the laboratories and the real-world emissions from actual driving pattern on roads. A lot of this has happened to dodge the tougher requirements for vehicle emissions control. Europe has responded by further tightening the test parameters for diesel cars after such technical jugglery by VW.

India has also inherited some of these reforms that will make tougher demands on car makers. Our cars will also be tested for real world emissions, and will be monitored from the full range of driving conditions.

This will monitor deviation from the certification level and ensure durable performance of emission control systems. Some of these tougher measures are expected to be enforced by 2023. These include real world emissions monitoring using portable emission measurements, in-service compliance, not-to-exceed emission limits with conformity factor to narrow down the margin of emission-deviation on road.

India still has a long way to go to completely align itself with the European reforms. Market surveillance, independent verification, testing and inspection by regulatory authorities of in-use vehicles and public disclosure of emissions data will soon become mandatory. All these checks will ultimately lead to a noose dangling over diesel vehicles.

Cautionary Delhi regulation
Following the Supreme Court directives, diesel cars that are more than 10 years old have been banned in Delhi. Also, diesel trucks more than 10 years old cannot enter Delhi. Further, big diesel cars and SUVs with engines displacing more than 2000 cc pay environment pollution charge. All diesel trucks pay environment compensation charge to enter Delhi, and environment cess is collected from each litre of diesel sold in Delhi. The regulations in Delhi are exemplary and other states in India may soon follow suit.

BS-VI glitches
In order to counter the ever-increasing pollution threat and make the tailpipe emissions less harmful, India is scheduled to adopt the BS-VI regulations from 1 April 2020. This has resulted in many manufacturers investing a huge amount into making cleaner diesel engines. The usage of expensive devices in BS-VI-compliant diesel engines and the huge money-input by the companies will result in diesel cars getting a lot pricier.

The roll-out of the BS-VI norms, the installation of new catalytic converters, particulate filters and upgraded engine management software may increase the price of diesel cars as much as Rs 1.80 to 2 lakh higher than their petrol siblings, depleting their demand further.

International trends
Global technologies are evolving to meet the air pollution and climate change mitigation targets. The global market is changing gears to get off the diesel route to go the electric and hybrid way.

Europe, which was most obsessed with diesel cars primarily to meet carbon dioxide (CO2) or fuel economy targets, has reported a slowdown in diesel car sales since 2017. On the contrary, European Automobile Manufacturers Association (ACEA) has reported that the sale of ‘alternative’ vehicles — hybrid, electric, liquefied petroleum gas and natural gas-powered vehicles are on the increase.

Madrid and Athens are banning diesel cars entirely. The UK and France plan to ban new petrol and diesel cars and vans from 2040. With growing pollution fears, diesel car sales have crashed in the UK. France plans to reverse favourable tax treatments for diesel. Copenhagen’s mayor had announced plans to ban new diesel cars from entering the Danish capital by 2019. Diesel cars have lost market share even in Germany — the stronghold of diesel car manufacturing.

European consumers are also gradually turning away from diesel cars. Several auto makers in Europe have increased their investment in electric cars as regulators have pushed for tougher rules. Volkswagen has announced complete makeover to electric cars.

The Indian market cannot remain insular to global trends. Tougher requirements for real-world emission performance, fears of emissions cheating, big push for electric vehicle programme, incentive for electric vehicles under fuel economy regulation, and air quality and climate mitigation targets will further shrink the space for diesel cars in the Indian market. Even the Society for Indian Automobile Manufacturers hopes for 40% electric vehicles in new sales by 2030 which is a striking figure and perhaps no longer a too ambitious one. Apparently, diesel is not the future solution.

Withdrawals by car companies
The decision to stop sale of small diesel vehicles, on account of an unviable increase in cost, upon switchover to enhanced emission norms, along with sinking demand reflects upon many car manufacturers.

Maruti Suzuki: The country’s largest carmaker, which gets over 20% of total sales from diesel cars, earlier announced plans to phase out diesel cars after BS-VI implementation due in April 2020 due to cost implementation. However, contrary to earlier announcements, Maruti Suzuki India Limited may not completely phase out diesel passenger vehicles post implementation of Bharat Stage VI emission norms, as reported by Economic Times. According to Shashank Srivastava, Executive Director, Maruti Suzuki India, "What we had announced was that for smaller diesels, we will move out of the same since converting from a BS-IV to a BS-VI vehicle in diesel is expensive. However, in the larger diesels, the company still has options open."

"We are going to study the reaction of the consumer because those vehicles will also come at a higher cost. So we have to study the consumer reaction and then we will decide what is to be done regarding BS-VI for larger diesels," said Shashank Srivastava. The company has also announced that Brezza and S-Cross will have a BS-VI petrol vehicle very shortly, by the end of this year.

Tata Motors may discontinue all its diesel-powered small cars. This is quite interesting considering that the diesel engine has been Tata’s forte. However, it seems to be ready for discontinuing the 1.05-litre oil-burner for the Tiago and Tigor. In fact, neither of its upcoming small cars, which include the Altroz and the production-spec H2X, would have a diesel heart.

Speaking on the topic to Cars24, Mayank Pareek, President, Passenger Vehicles Business Unit, Tata Motors, said, "We feel that low demand for entry and mid-size diesel models will not justify the high costs involved in developing a new small capacity engine." Pareek has even said that nothing less than 80% of the demand in the small car segment is for petrol models. The additional investment for developing BS-VI compliant diesel engines for the aforementioned segment does not make much sense.

Renault: French auto maker Groupe Renault will stop offering diesel engine options on new vehicles in India, the company’s Chief Executive Officer, Thierry Bolloré announced in June 2019. To begin with, Renault’s latest product, the Triber multi-purpose vehicle, is available only with a petrol engine.

"Today, there is a clear regulatory approach saying that diesel is not welcome any more. Even the gasoline internal combustion engines will not be entertained in Europe in the future. The regulation is designed to push forward the car manufacturers to electric vehicles and other electrified power trains. As a consequence, we have decided to limit the development of power trains in diesel. Even light commercial vehicles will soon be electric vehicle oriented. Triber also has no diesel engine," Bolloré said on the sidelines of the unveiling of the new model.

Bolloré did not specify on the future of Renault’s Duster, Lodgy and Captur models which are offered with diesel engines in India at present.

Renault’s local unit will become the first mass market automobile manufacturer in India to launch a product in the utility vehicle (UV) segment without a diesel engine.

Toyota: Japanese automaker Toyota Kirloskar Motor is looking at stalling the sale of small diesel vehicles in the country post the transition to BS-VI emission standards.

While the company will continue to offer diesel fuel options in larger utility vehicles, Innova and Fortuner, it will discontinue the 1.3 litre diesel engine it currently has strapped on Etios, Etios Cross, Liva and Corolla Altis.

A senior industry executive in the know regarding the development said, “While the Etios series is at the end of its lifecycle, Toyota will discontinue the diesel version of the Corolla Altis as the cost economics of the product after transition to BS-VI emission standards will not be viable for the consumer.”

MG Motor: New entrant MG Motor India has said that it would only make sense for the company to offer diesel fuel options in vehicles priced at over Rs 15 lakh post migration to BS-VI standards.

Optimistic indications
Implementing a carpet ban on diesel-powered vehicles will pose a huge challenge to the government and hence is most unlikely. It’s worth a mention here that it took Europe over a decade to completely shift to the Euro-6 emission norms, while India is just on the threshold of implementation of BS-VI standards. Hence, a sudden restriction on diesel passenger vehicles does not look imminent.