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Customer rush for diesel vehicles wanes


Huge demand for diesel- engine-powered cars, driven by high price difference between the fuel and petrol and the fear of the government raising excise duty on diesel vehicles, is waning across the country, as the current sluggishness in the auto market is hitting diesel variants as well.

Most dealers across the country have already started to offer consumer benefits such as free insurance or registration, free accessories, exchange bonuses and reduced interest rates on diesel cars, which were earlier offered only on slow-moving petrol models.

Diesel models of auto makers like Maruti Suzuki India, Volkswagen India, Tata Motors, Toyota Kirloskar Motor, Mahindra and Mahindra (M&M), ranging from compact hatchbacks to sports utility and multi-purpose vehicles, are being offered with a variety of benefit schemes, say industry officials and dealers.

Maruti Suzuki’s ‘SX4’ diesel variant is being offered at a total benefit of Rs 70,000, while Tata Motors’ ‘Indigo ECS’ and ‘Indica Vista’ diesel models are offered with cash discounts and an exchange bonus of Rs 40,000. M&M is offering extended warranty and free insurance on the ‘Xylo’ and ‘Scorpio’ vehicles.

Most discounts are given at the dealer level in order to liquidate their stocks, dealers said.

Demand for diesel-powered vehicles hit new highs in recent months as petrol prices rose sharply after the government deregulated the fuel in 2010, while diesel price, still decided by the government, remained stable. Now, diesel is about Rs 30 a litre cheaper than petrol.

According to officials from industry body Society of Indian Automobile Manufacturers, 45 per cent of the total passenger vehicles sold in India in May were diesel variants. However, the trend is slowly changing as there is a “vacuum for new buyers,” say industry officials.

P Balendran, vice-president, corporate affairs, General Motors India (GM), said, “Demand has weakened even for the diesel variants of the ‘(Chevrolet ) Beat’. The market continues to remain sluggish. Interest rates are too high at the moment.”

Market analysts say the fear of imposition of additional tax on diesel vehicles was one of the primary factors behind the unusual surge in demand for diesel vehicles in the past few months. While petrol models were offered in ready delivery form, most diesel models carried a waiting period, ranging from two weeks to eight months.

“Though diesel is still preferred over petrol, many buyers preponed their purchase to escape the proposed tax on diesel vehicles. There could be a vacuum for new buyers for a few months. The market is bottoming out now, and manufacturers will have to balance it with consumer benefit offers for slowing products,” said a Mumbai-based analyst.

Sales of Maruti Suzuki’s mid-size sedan, SX4, slumped 85 per cent last month to 405 units against 2,702 units recorded in the corresponding month last year.

Tata Motors, whose 70 per cent sales come from diesel, saw a drop of 20 per cent in the sale of its Indigo range in May to 3,397 units, compared with 4,268 units a year ago. However, the auto industry is confident that the demand for diesel-powered vehicles will pick up.

“We are not offering any discounts as of now, as we are expecting demand to improve in the festival period,” said GM India’s Balendran.

Added Pawan Goenka, president (automotive and farm equipment sectors), M&M: “Diesel is where the growth is, because there has been a degrowth in petrol (models) in the past months. There has been a a lot of shifting of demand towards diesel. Waiting periods on several diesel models have come down.”