With rising diesel prices and new emission norms, are small diesels on the way outIJ
As fuel prices touch multi-year highs, one would have assumed that sales of diesel vehicles would also climb. After all, the same small car is far more economical on a per-kilometer basis running on diesel, than on Petrol. Yet, diesel cars, which just a few years ago accounted for one in two new cars sold, now account for just one in every four new cars and that number is declining sharply. The reason behind this is a combination of both consumer demand as well as carmakers slowly weaning the buyers off diesel. This is aided by the Government allowing oil marketing companies to increase prices on diesel. From a difference of Rs 30 in the prices between the fuels, it is under Rs 10 now and if European prices are any indication, the Government could be targeting parity soon enough.
There is also the fact that Bharat Stage-VI emission norms will become mandatory by April 1, 2020. These norms will mean a large fixed cost for the mechanism that will help diesel engines trap carbon. And because the cost is an absolute one, in percentage terms, it will have a massive impact on smaller and cheaper diesel cars than on larger luxury cars. All of this, coupled with bad press the heavier fuel received during the ‘dieselgate’ crisis which involved Volkswagen Group cars cheating on emissions tests; as well as a rapid adoption of hybrids and electrics in North America, China and Europe, have meant a massive decline in diesel’s popularity, particularly in Europe. Sales of diesel passenger cars was always limited in North America and China.
Of course, there will still be an anomaly in car sales, diesel-powered cars will remain the more popular choice for expensive luxury cars as the costs of Bharat Stage-VI adoption will in percentage terms be less for them. In the Mercedes S-Class luxury limousine, for example, diesel engined versions account for nine out of every 10 sold. The numbers are similar for other luxury and premium cars that cost above Rs 20 lakh. However, these cars account for just a small percentage of the overall car sales in India. And while diesel fuelled passenger vehicles will still have a raison d’etre, which is for hauling large number of people or even cargo and while diesel will be the fuel that enables the long-distance transport and logistics sectors, the fact that diesel will gradually disappear from the large number of small urban runabouts should not be lamented. That said, it is imperative that the Government puts in place a policy that will promote hybrid vehicles that will allow consumers to reduce their fuel bills and emissions, a win-win for all.