Diesel cars to corner 50% of car sales in 3 years

Spurred by lower fuel price and higher mileage, the charm for diesel is set to get even stronger with nearly half of new car sales coming from the fuel in the next three-to-four years against the 30% share now, top officials from companies like Maruti and Volkswagen said.

Sales of diesel cars have already been growing faster than petrol cars over the last few years and the widening price differential between the two fuels will only add to the trend.

Demand for diesel has been very high, prompting companies to look at more and more variants on the fuel, which used to command 23% of overall sales in 2005-06, said Shashank Srivastava, chief GM (sales & marketing) at Maruti Suzuki India . "I expect diesel percentage to be significantly higher than the 30% now. It can be as high as 45-50% over the next three-to-four years," Srivastava said.

Experts said the lower running cost on a diesel vehicle (less than half of petrol car), and the government's reluctance to make the price of the fuel uncomfortable, has given confidence to buyers as well as manufacturers to bet on the fuel. While petrol cars may be available off the shelf, their diesel variants enjoy huge waiting lists. Diesel variants of models like Swift, Dzire, Polo and Figo have been among those that command a waiting since launch.

Srivastava said the popularity of diesel could be seen by the fact that whenever a model had both petrol and diesel options available, the sales have been higher for diesel. "In most of such models, diesel accounts for as high as 70% of volumes," he said.

Neeraj Garg, director of sales at Volkswagen Passenger Cars, is even more bullish. "Diesel can be half of the total car market even before three-to-four years. The fuel is growing very strongly and has taken even us by surprise, forcing us to produce more of diesel."

The company's two mainline models-Polo hatchback and Vento sedan-already have 50% of their sales on diesel. "While the price differential is forcing people to look at diesel, the engine refinement and advancement is also something that makes them go for the fuel," Garg said.

Going by the trend, companies are already padding up for the big push in diesel. Hyundai is setting up a diesel engine plant, while companies like Maruti, GM and Ford are boosting the capacity of diesel engines.

"The trend is certainly strong, but we at Hyundai believe it will grow by another 5-7% in the next three-to-four years. Even this increase should not be seen as small as it comes in a large growing market," said Arvind Saxena, director (sales and marketing) at Hyundai India

Experts added that a variety of new launches on diesel-especially in the small car segment-are likely to result in faster, widespread adoption of the fuel. GM will get a diesel version of the Beat hatchback while Tata is also working on a diesel Nano. Both Hyundai and Maruti are also expected to get diesel in their large-volume models. Even Toyota will launch a diesel version of its soon-to-be-launched small car Liva.

"When diesel becomes widespread in the small car segment, which commands for the lion's share in the car market, then it will be big. This will happen soon," Srivastava said. The only irritant to growth could be higher excise duty on diesel cars, as suggested by a government committee.