The huge demand for the diesel cars that was triggered by a huge gap in prices of diesel and petrol seems to be fading now. Earlier, the demand had also been boosted by the uncertainty around the hike in excise duty on diesel vehicles. However, the latest development is that diesel cars in India are also feeling the impact of the slow growth rate of the market. Several dealers across the country have started offering free insurance, registration or accessories; exchange bonuses; and reduced interest rates on diesel cars in order to pace up sales. Companies like Maruti Suzuki, Volkswagen, Tata Motors, Toyota Kirloskar Motor, Mahindra & Mahindra (M&M) have begun offering variegated schemes to lure buyers. These offers are available on various diesel models across different segments in the market.
Maruti Suzuki is offering total benefits of Rs. 70,000 on purchase of the diesel variant of its SX4. On the other hand, cash discounts and exchange bonuses worth Rs. 40,000 can be availed on purchase of Tata Indigo eCS and Indica Vista diesel models. With its Xylo and Scorpio, Mahindra is offering extended warranty and free insurance. According to dealers, most of the offers to push sales of the piled-up inventory are provided at their level only.
As per Society of Indian Automobile Manufacturers (SIAM), diesel cars formed 45 per cent of the total car sales in India in May 2012. However, according to officials, the demand is on a downward curve as there is a dearth of new customers. Previously, with diesel being Rs. 30 cheaper than petrol in the country, the demand for diesel-run cars soared in the recent past. This happened when the price of petrol touched a record high, whereas the cost of diesel remained constant.
Vice President, Corporate Affairs, General Motors, P. Balendran, said, “Demand has weakened even for the diesel variants of the (Chevrolet) Beat. The market continues to remain sluggish. Interest rates are too high at the moment.”
According to market analysts, the main reason behind the massive demand for diesel cars was the fear of additional hike in tax on diesel vehicles by the government. Most of the diesel car models available in India commanded a long waiting period, varying from two weeks to eight months, while petrol cars were available off the shelf. A Mumbai based analyst said, “Though diesel is still preferred over petrol, many buyers pre-poned their purchase to escape the proposed tax on diesel vehicles. There could be a vacuum for new buyers for a few months. The market is bottoming out now, and manufacturers will have to balance it with consumer benefit offers for slowing products.”
Maruti Suzuki sold 405 units of SX4 mid-sized sedan in May 2012 as compared to 2,702 units sold in the same month in 2011, an astonishing 85 per cent reduction in sales. With 70 per cent sales volume credited to its diesel line-up, the sales volume of Indigo series dipped by 20 per cent, as Tata Motors sold 3,397 models in May this year against 4,268 cars sold in the same month in 2011. However, the industry is optimistic that the demand for diesel-run cars in India will soon rise.
President, Automotive and Farm Equipment Sectors, M&M, Pawan Goenka, said, “Diesel is where the growth is, because there has been a degrowth in petrol (models) in the past months. There has been a lot of shifting of demand towards diesel. Waiting periods on several diesel models have come down.”
