Doomsday for diesel?

ByNabeel Ahmed

Jul 3, 2020

Exponential increase in price of the fuel coupled with a slowdown in sales of diesel vehicles has put a question mark on the future of diesel vehicles in the country

At the time of writing this article, the price of diesel in Delhi stands at Rs 80.53 for a litre. At the same time, the price for a litre of petrol stands at Rs 80.43 — a small difference in price, but a big difference in the future of the first fuel.

Historically, diesel has been cheaper than petrol, and rightly so, making the diesel engine the preferred option for motorists covering hundreds of kilometres a day and for trucks. But hikes in diesel prices have a direct impact on the pricing of essential commodities, due to an increase in transportation costs. Couple this with the more stringent BS6 emission norms and the diesel engine could soon be a thing of the past.

First patented in the US in 1895, the diesel engine, emerging from the works of Rudolf Diesel, brought about a revolution in the engines of the time. The new engines developed by Rudolf were more efficient at harnessing power from fuel and were seen as the successor to steam engines of the time. Such was the appeal and success of the fuel and diesel vehicles that in until the 1960s, governments were subsidising the purchase of diesel-powered vehicles. However, towards the end of the 20th century, when global warming became a real threat, countries introduced legislation to curb the use of diesel as a fuel, especially in crowded cities due to its notoriety of producing high concentrations of NO2 and PM2.5, both of which can severely impact air quality, leading to a host of problems in humans.

Today, the worsening of air quality in major cities around the world have led to the strengthening of existing norms and introduction of more stringent emission rules. In the national capital, new rules for use of passenger diesel vehicles and movement of goods transport vehicles running on diesel has already made a dent on the sale of diesel vehicles.

According to a report in the Economic Times, the sale of diesel vehicles in total car sales fell to 14% in the first quarter of 2019 from the peak of 47% scaled seven years ago. Considering that diesel-powered vehicles cost more than petrol vehicles, the rising cost of diesel has made purchasing diesel vehicles economically unviable for consumers.

The figures clearly reflect the shift in consumer preference. These stats when looked at from the prism of rising fuel costs and more stringent rules concerning the use of diesel-powered vehicles have automakers in a tough spot.

Looking at the sales figures, it is a no-brainer that the coveted diesel engine has now fallen by the wayside. Maruti, one of the most prominent carmakers in the country, had earlier announced that they would stop making and selling diesel powertrain vehicles from 2020. However, considering that diesel sales accounted for 21.9% of all their sales, they had to rethink their strategy.

Mahindra and Mahindra faces the same problem as 93% of all their sales came from diesel engines. In order to ensure viability in sales, the company has invested heavily in e-vehicles and petrol engines. Other manufacturers like Hyundai and Nissan too are looking to make the switch from diesel to petrol vehicles.

An example of the fall from grace for the diesel engine was witnessed when Kia and MG made their debuts in the Indian market. Kia’s Celtos saw 51% sales in their petrol variant, while for MG more than 10% of the sales were seen in hybrid powertrains with over 42% sales in petrol variants. Considering that both these vehicles belong to the SUV segment which popularly has been dominated by diesel engines, the future of diesel engines looks bleak.

As sale figures stumble, automakers are making a switch towards petrol and hybrid power trains // Photo: QZ.com

After a massive fall in the international crude oil prices in April, the government jacked up taxes to make up for the loss in income due to low sale figures in oil due to the lockdown. However, now that international prices have stabilised, taxes have not been repealed. Taxes under the Central government standing at Rs 32 per litre and VAT at Rs 19 per litre, making the fuel all the more expensive.

Considering the country is going through a pandemic, with unemployment on the rise, automakers are giving heavy discounts on diesel vehicles. Despite this, sale of diesel vehicles has witnessed a steady decline. The difference in pricing between petrol and diesel at the moment may be just 10 paise, but this has had a big psychological impact on the consumer’s mind who opted for diesel vehicles because of cheaper fuel.

If the trends continue, we could soon witness further decline in the number of vehicles powered by the fuel. And without a sustainable gameplan for the adoption of hybrid, electric and CNG powered vehicles, options for consumers would be even less than they are today.

(Cover: Rising prices of diesel and the economic impact of Coronavirus have slowed down sale of diesel-powered vehicles in the country // Photo: Getty)