Pulling power of diesel drops in SUV sales surge

Sales of sport utility vehicles may be growing faster than the automobile industry, but not those of the variants running on diesel, which has traditionally powered these so-called ‘fuel-guzzlers’. Though sales of SUVs increased 36% on year to more than 1.67 million units in fiscal 2023 ended March 31, the share of diesel in the mix continued to decline, falling to 36.9% from 38.9% the previous fiscal year and as high as 81.6% in FY19. SUVs accounted for about 43% of the total passenger vehicle sales of 3.9 million units in fiscal 2023.

SUV enthusiasts, particularly in the entry and mid segments, are giving the fuel the short shrift, said industry insiders, as an increase in the price of diesel-run vehicles with the transition to BS-VI emission standards has erased gains from lower running costs. More than four out of every five SUVs sold at the entry-level in India now run on petrol, up from about a quarter three years ago. In the mid segment, the share of petrol has grown four-fold to 45.3% in the same period.

Several senior industry executives ET spoke with said in addition to the sharp increase in the price of diesel vehicles, narrowing price differential between petrol and diesel and the ban on diesel vehicles aged over 10 years from plying in the National Capital Region (the largest market for passenger vehicles in India) have dampened demand. The Delhi government has also been restricting movement of BS-IV-compliant diesel vehicles intermittently in a bid to manage the capital’s notorious air quality in winters.

Maruti Suzuki to Hyundai Motor India and Honda Cars India pulled the plug on more than 50 models of diesel cars and utility vehicles in the last three years, amid the shift in consumer preference to petrol. This shift to petrol is more pronounced in small cars and sedans where the share of diesel now stands at 1.2% (9.6% in FY19) and 2.4% (40.1% in FY19), respectively.

Shashank Srivastava, senior executive director (marketing and sales) at Maruti Suzuki, said economics of owning a diesel vehicle was not favourable anymore. “If running cost of petrol and diesel vehicles is nearly similar, why should a consumer pay a higher acquisition cost to own a diesel vehicle? Diesel is no longer viable in hatches and sedans. In the SUVs, too, diesel is relevant only at the higher end of the market,” he said.