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Festive cheer for car makers as diesel ban ends

 

Heavy traffic moves along a busy road during a power-cut at the traffic light junctions in New Delhi

Heavy traffic moves along a busy road during a power-cut at the traffic light junctions in New Delhi

 

  The Supreme Court today lifted the eight month old ban on sales of diesel vehicles with engine capacity of 2,000 cc and above in the national capital region after imposing 1% green cess on ex-showroom prices. The relief comes right in time as dealers will now start stocking vehicles to meet the festive season demand. 

 

The rate of 1% comes as a relief as there were apprehensions of high double digit cess. The industry welcomed the decision. “We are very relieved with the decision of the Supreme Court today. Hope this decision will put all controversy surrounding diesel fuel behind us and we will be able to focus on the more important task of making our vehicles compliant with BS VI norms by April 2020," said Pawan Goenka, executive director at M&M. 

The ban, imposed on December 16 last year, impacted a number of players. Toyota is estimated to have lost sales of 8,500 units of Innova and Fortuner due to the diesel ban in NCR. Utility vehicle major Mahindra & Mahindra's popular products such as XUV500 and Scorpio were also hit by the ban in NCR. But, it responded with advancing the launch of 1,990 cc diesel engine (that was being developed for the global market) for vehicles in NCR. The new engine M&M launched in January has taken care of its NCR market. Mercedes Benz, the largest luxury car player in the Indian market, reported its first sales decline during H1 of 2016 after three consecutive growth years. It has also scaled up petrol offerings for most of its models.

The impact of the ban, however, was not limited to companies manufacturing diesel vehicles of the specified engine capacity. It created challenges for vehicles below 2,000 cc as well as buyers turn apprehensive about the fate of diesel vehicles across the nation. Most car makers have invested heavily in recent years to expand diesel capacity when a controlled fuel pricing made diesel highly attractive vis a vis petrol. 

Regulatory uncertainties such as diesel ban and a narrowing price gap between petrol and diesel have driven buyers away from diesel cars and forced manufacturers to offer higher discounts on diesel cars. According to Society of Indian Automobile Manufactures (Siam) data, the share of diesel variant in new cars fell to a low of 27% during April-June quarter against 52% four years ago.