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From being one of the largest markets for diesel vehicles barely a decade ago, India’s share of diesel cars has slid to less than 20% and may shrink further when stricter emission norms kick in. Mint charts the trend of decline in diesel car sales and the reasons that led to it.

How has the sale of diesel cars fallen?

From a high of 54% in 2012, the share of diesel in passenger vehicles has fallen to less than 20% in the first half of 2022. Barring one segment, the decline is homogenous across categories. In cars that are smaller than 4 metres, it accounts for only 1% in hatchbacks and sedans, and it’s 25% in vans and utility vehicles and 16% in compact SUVs. In sedans overall, the share has dropped to less than 10%. Even in large 7 seater utility vehicles, diesel has lost out to petrol and CNG thanks largely to Maruti discontinuing the diesel Ertiga. Only in SUVs over 4 metres, diesel still accounts for over 80% share.

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What are the reasons for this decline?

The slide mirrors the narrowing of the gap between the price of petrol and diesel. In May 2012, the gap was the widest at 32.27 per litre. This has come down drastically as the government has linked fuel prices to the market. It now stands at just 7.1 per litre in Delhi. At the same time, the cost of making diesel engines compliant with stricter BS VI emission norms that came into effect in April 2020, has widened the price gap between petrol and diesel cars. Most of all, its image as a more polluting vehicle reiterated by the ban on diesel cars older than 10 years in Delhi/NCR has impacted resale value and smeared its reputation.

Closing gap
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Closing gap

Which companies have stopped making diesel cars?

Maruti Suzuki, VW Group which includes Volkswagen, Skoda and Audi, Renault and Nissan do not make diesel cars in India at all. As the largest player in the market, the decision by Maruti to discontinue diesel models had the biggest impact. Till a few years back, diesel was offered in seven of its models including the compact SUV Brezza which was not available in petrol.

Will petrol and diesel car price gap narrow?

Though fuel prices are now market-linked, oil marketing companies have not revised them since May. Oil minister Hardeep Singh Puri said recently that while there are no losses on petrol, firms are losing 3–4 a litre on diesel and that the government would need to back them financially. This rules out potential cuts in diesel price but a rise may be possible. The gap between petrol and diesel may, as a result, go down to 5 per litre which would make diesel cars even less attractive than petrol counterparts.

What is the future for diesel cars?

While diesel will remain the mainstay for freight haulage, its prospects in passenger vehicles are bleak. Stage 2 of BS VI emission norms is set to come into force next year. It will mandate real-time emissions tracking by an onboard diagnostic device, which would make vehicles pricier. Small diesel engines will need significant upgrades to meet the norms and most manufacturers could discontinue them. Recently, Toyota pulled the plug on the diesel version of Innova, which will dent diesel’s share further.

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