Maruti’s plan to phase out diesel vehicles puts suppliers on edge2 min read . Updated: 29 Apr 2019, 12:56 AM IST
- Suppliers are looking at other options from the carmaker to compensate for the resulting revenue losses
- Diesel vehicles contributed about 23% to Maruti’s total sales of 1.75 million vehicles in FY19
MUMBAI : Bosch Ltd, Continental AG and other vendors to Maruti Suzuki India Ltd are facing business uncertainties following the car maker’s decision to abandon making diesel vehicles from next April.
Those affected are the key engine parts suppliers to diesel powertrains used by India’s largest carmaker in its diesel vehicles, at least four people with knowledge of the matter said. These companies are undergoing a churn in their order books and production plans following Maruti’s decision, the people said, requesting anonymity.
“For Bosch, this is a big blow. The common rail system was a key contributor to our powertrain business in India. Suzuki had hinted us about its plan six-eight months ago. Although this will result into big revenues losses, the company will seek new gasoline-engine specific orders to compensate for the lost business. You will also see a transition in Bosch’s focus, which is now shifting towards electric mobility," a senior official from Bosch said, requesting anonymity.
One of the four people cited above said Continental has an assembly line at its plant at Chakan near Pune to make the so-called common rail direct injection or CRDi systems for Maruti Suzuki. “This development will certainly affect their production schedules," the person said.
Bosch did not respond to queries while Continental declined to comment to queries emailed on Thursday.
An email sent to Maruti Suzuki remained unanswered till press time.
The Suzuki Motor Corp. unit announced on Thursday its plan to phase out diesel vehicles from 1 April 2020 coinciding with the introduction of stringent Bharat Stage VI norms. It will instead focus on vehicles that run on petrol and compressed natural gas.
Diesel vehicles contributed about 23% to Maruti’s total sales of 1.75 million vehicles in FY19.
The people cited above said key parts suppliers to diesel engines—a Fiat-sourced D13 multijet (commonly known as 1.3 liter DDiS 200) and the in-house developed 1.5 litre DDiS 225—used by Maruti view the diesel phase out plan as a major hit to their businesses.
These suppliers are now looking at other options from the car maker to compensate for the resulting revenue losses, as well as diverting their dedicated production lines and capacity for other vehicle manufacturers and focusing on new technologies among others.
One of the four people said the CRDi system used in modern diesel engines is an “expensive part" whose suppliers would now be forced to adjust production schedules and find new business opportunities. These include suppliers of key diesel engine parts such as CRDi systems, EGR valves, turbochargers, alternators, starter motors and diesel tanks. Suppliers of pistons, piston rings, cylinder liners, engine blocks and other key parts for diesel engines will also have to re-work their product designs to make them suitable for petrol engines, which will lead to investments in dies and machining of the parts. This will also affect schedules of companies such as Denso, Magneti Marelli Powertrain India and SKH Metals.
A senior industry official, who did not want to be named, said there is an immense churn within Maruti’s supplier community currently. “The carmaker was as it is late to roll out its 1.5 litre diesel engine because it struggled to ensure the engine’s compliance with the BS IV norms. It does not make a business case to further upgrade that engine to meet the BS VI norms. If so, it might cost an additional ₹1,50,000 to the end consumer. Nevertheless, management decisions are heavily dependent on the ever-changing market dynamics and business cases of a product," he said.