Market share of diesels has halved since FY2017, with the switch to petrols getting accelerated with the introduction of BS6 norms.
Petrol power has eclipsed diesel in the Indian market, and it's a global trend too. Be it the implementation of the stringent BS6 emission norms from April 2020, which saw some carmakers pull out of the diesel space, or the fast-diminishing price differentials between diesel and petrol, demand for diesel-powered vehicles has toppled in the passenger vehicle (PV) segment over the recent past in favour of petrol vehicles.
Share of diesel PVs has declined
Compact cars have registered 90 percent petrol sales
Diesel demand is still significant in mid-size SUV segment
To further amplify confusion in consumer purchase decisions, rulings such as a 10-year lifetime of a diesel car in the National Capital Region, compared to the 15-year validity for petrol cars, as well as the higher maintenance cost of a complex BS6 diesel vehicle, over its petrol counterpart, are making many potential diesel car buyers opt for the safer choice of petrol.
Market shift from diesel to petrol PVs
The marked shift in consumer and market demand, evident in the past few years, has come to the fore in the five-month April to August period of FY2021. Petrol-powered PVs have witnessed a sharp growing demand from 66 percent in April-August 2019 to 81 percent in April-August 2020. In comparison, demand for diesel PVs has shrunk significantly from 34 percent to 19 percent. Total PV sales during this five month period were 5,52,429 units (April-August 2019: 10,91,928 / -49 percent) in a market severely impacted by the pandemic.
A quick glance at the PV sales data from the past four fiscals, reveals that the share of diesel PVs has shrunk from 40 percent in FY2017 to 19 percent in April-August 2020, and that of petrol has soared from 60 percent in FY2017 to 81 percent in April-August 2020.
Let’s take a closer look at the key PV sub-segments to get a better overview of the situation. The April-August 2020 sales figures also need to be viewed in light of the dampened market conditions in the first few months of FY2021.
Passenger car sales (compact cars): Length up to 4,000mm, engine displacement up to 1,400cc
This is where the meat of the market lies and it’s a fast-growing sub-segment within PVs, with a slew of offerings including B, B+ hatchbacks as well as compact sedans.
Compact passenger cars sold 2,30,048 units between April and August 2020 (April-August 2019: 5,20,321 / -55.8 percent) with as much as 90 percent sales coming from petrols.
The Honda City saw 1,533 unit sales of diesel cars between April and August 2019 turn to zero diesel sales during the same period this year, despite the new generation car launched in July 2020, continuing the 1.5-litre iDTEC diesel engine. Petrol sales, in comparison, stood at 4,977 units (9,393 / -47 percent).
The Hyundai Verna, for which the 1.5-litre diesel is a preferred customer choice due to its automatic transmission option, saw a significant drop in demand and sold 1,819 units in April-August 2020 period compared to 5,015 units last year, thus recording a 64 percent decline. At the same time, sales of the petrol Verna were 3,502 units (6,242 / -44 percent).
Utility vehicle sales: Length up to 4,000mm, price less than Rs 20 lakh
The UV segment, which is the strongest accelerating sub-segment within the PV space, is also instantly seeing the ramifications of the decline in diesel demand.
From 10,025 units in April-August 2019, the Ford EcoSport has sold 4,356 diesel variants, a 57 percent drop. Petrol EcoSport sales totalled 2,382 units (6,043 / -61 percent) during the same period.
The Honda WR-V has lost the diesel battle from selling 3,053 units to a mere 785 units between April and August 2020, a massive 74 percent downfall. Petrol WR-V sales in comparison, stack at 1,449 units (3,844 / -62 percent).
The Tata Nexon has also witnessed a substantial drop in diesel sales with volumes dropping from 4,787 units to 737. These have been substituted by the petrol’s 2,660 units (7,865 / -66 percent) as well as the Nexon EV which went home to 266 buyers.
On the other hand, the newly launched Kia Sonet is betting big on diesel with the company going as far as offering a first-in-segment diesel automatic option in its line-up too.
The Maruti Suzuki Vitara Brezza and the Hyundai Venue have seen the most significant and critical impact of the plummeting demand for diesels. While the Brezza completely lost a significant 41,848 units of BS4 diesel variant sales to 19,824 units of the petrol-only BS6 model sales, the Venue saw a tremendous drop in diesel demand from 14,820 units to 6,238 units, a 58 percent year-on-year (YoY) decline. Sale of petrol-powered Venues, however, moved to 14,134 units (19,919 / -29 percent).
The diesel-favourite Mahindra XUV300 too recorded a sharp decline in diesel demand from 15,903 units in April-August 2019 to 5,944 units during the same period in 2020 – a noticeable 63 percent YoY decline. Petrol-engined XUV300s, however, went home to 2,634 buyers (5,175 / -49 percent).
Utility vehicle sales: Length up to 4,400mm, price less than Rs 20 lakh
The midsized crossover segment, at present, is also one of the most popular spaces to be in the Indian PV market. Products like the Hyundai Creta, Kia Seltos, Mahindra XUV500, Maruti Ertiga, XL6 and S-Cross, MG Hector and the Tata Harrier attract a huge chunk of buyers to their respective carmaker’s showrooms, given the market’s growing affection for SUVs.
Between April and August 2020, out of the 2,21,251 UVs sold, these mid-sized UVs comprised 43 percent of the total volumes at 94,398 units. While the sub-segment is also seeing buyer preference shift towards petrol, it is still relatively immune to the general market trend, given these vehicles are also considered from a long-distance driving perspective.
The segment stalwart Hyundai Creta, has maintained diesel sales at 20,844 units between April and August 2020, compared to the 28,071 units sold in April-August 2019. The SUV is doing wonders for the Korean carmaker and raked in 11,758 units last month alone. Petrol-engined Cretas have also maintained their numbers at 12,882 units (12,390).
Hyundai’s sibling, Kia Motors India is also offering the Kia Seltos with the same diesel and petrol powertrains and saw demand for petrol drive slightly ahead of diesel at 15,302 units (3,635 / +322 percent), in comparison to the 12,348 diesel variants sold between April and August 2020 (2,610 / +373 percent).
The MG Hector’s 1.4-litre turbocharged petrol variants have also witnessed sales in sync with the market trend, wherein, the demand for petrol SUVs grew 166 percent from 1,477 units to 3,935 units during the period, while the diesel recording a 64 percent improvement in numbers at 3,359 units, in comparison to last year’s 2,049 units.
So, with the gradual onset of EVs, as well as a heightened focus on environment sustainability driving government policies and a push towards cleaner mobility that has clearly created a negative aura around diesel, the demand for mass-market oil-burning vehicles is dipping by the day. With carmakers voluntarily opting out of the segment, is there really a future for diesel cars?
The case for diesels
Diesel has been, somewhat, a demonised fuel. Diesel engines are more economical than petrol engines, which still haven’t caught up despite advances like direct injection. Diesel engines are still far more efficient than petrol engines at converting fuel to mechanical energy. In fact, including the energy advantage of the fuel itself, diesels are up to 40% more efficient at doing that.
Diesel generates less CO2 because it’s more efficient and burns less fuel. It does create more oxides of nitrogen (NOx) inside the combustion chamber but this is cleaned up by exhaust after-treatment, such as SCR (selective catalyst reduction), and the latest diesels produce extremely low amounts of NOx. While the fact is that BS6 fossil fuels are very clean.
Market reality and consumer perception of diesel though, in recent times, are having a say in vehicle sales. Take a close look at the fuel-wise vehicle sales split across the passenger car, utility vehicle and van segments and the writing is on the fuel wall.