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Petrol becoming the fuel of choice for UVs

The Supreme Court’s decision to ban the registration of large diesel vehicles in the National Capital Region has had its desired impact – petrol is increasingly becoming the fuel of choice for buyers of utility vehicles.

This has traditionally been a bastion of diesel that has better pulling power and fuel economy. Diesel powered vehicles had prevailed despite the government scrapping subsidies associated with it.

While the ban only covered Delhi and the NCR its impact is being felt all over the country as people believe that the ban could encompass their cities soon due to growing concerns over pollution in India's cities.

Sales of petrol powered versions comprised as much as 13% of total utility vehicles sold in the country in the last financial year. This might seem a fraction of the diesel vehicle sales but compared to the figures five years ago that were 2% of total utility vehicle sales it represents a huge leap for the petrol powered vehicles. The domestic market for utility vehicles grew more than 80% in the same period to 5.87 lakh units.

The shift to petrol in the SUV space has been more prominent in the past few months, especially after the court order, said industry experts, a trend that is driving auto makers to also change their strategies.

Toyota Motors and Mahindra & Mahindra, which relied on their big diesel-run utility vehicles to power sales, are investing in petrol to meet the new demand.  Maruti Suzuki is mulling launching a petrol version of the S Cross, something that the market leader didn't think about until a few months ago, people in the know of the plan said.

"Given that more and more manufacturers are planning to introduce petrol versions in this category, the trend should continue over the next few years," says Gaurav Vangaal, senior analyst (light vehicles forecasting) at IHS Automotive.

In fact, the demand for petrol versions was higher in the compact SUV space compared with the rest of the segment, accounting for a fifth of the sales in the past fiscal year.

This despite the fact that these vehicles — with engine size of 1.5 litre or less — are unaffected by the court ban, which covers diesel engines displacing 2 litres or more, an indication of a definite trend towards petrol in the entire SUV space.

"The emerging trend in SUVs is the increasing preference for petrol powertrain by customers, especially in the compact SUV segment," said Rakesh Srivastava, senior vice-president of sales and marketing at Hyundai Motor India.

At Hyundai, sales of the Creta SUV has seen a marked shift towards petrol since the December court order.  In April, as much as 29% of the sales of the model came from petrol versions as against 21% in December. At Mahindra, petrol versions of the KUV100 launched in January accounted for as much as 44% of total sales until March end.

While 42% of sales for the Honda Mobilio came in from petrol, the proportion of sales from petrol powertrains for Maruti Ertiga and Ford EcoSport was 35% and 33%, respectively. All these vehicles are powered by engines displacing less than 2 litres.

Industry executives believe that the trend started when diesel was deregulated, narrowing its price difference with petrol, but it picked up pace after the court order.

"While the reduced price differential between petrol and diesel fuel has had a role to play, the anxiety among consumers on account of recent decisions taken by the Supreme Court and the National Green Tribunal have accelerated the shift," a senior executive at a leading Japanese car maker said.

The price gap between petrol and diesel has come down from its peak of Rs 26 in fiscal 2012 to Rs 14-16 now, skewing demand in favour of petrol vehicles, though that was mostly in the passenger car space so far.

Toyota Kirloskar Motor, the local unit of Japanese major Toyota, has commenced work to bring in a petrol-powered option of its bestselling product, the Innova.

Mahindra is investing Rs 1,000 crore to develop three new petrol engines — displacing 1.5 litre, 1.6 litre and a 2.2 litre — to add to the 1.2 litre petrol engine strapped on the KUV100. The four engines, in some time, will be available across the company's entire product portfolio, said company sources.