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Maruti Suzuki may put its plan to ditch diesel in reverse gear

Maruti feels it would miss out on a sizeable market share if it leaves the space but its rivals stay put.

Updated: Dec 13, 2019, 08.33 AM IST
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MUMBAI: Maruti Suzuki is reconsidering the plan to ditch diesel vehicles from its portfolio, after its key rivals decided to continue in the segment, people in the know said.

The nation’s top carmaker had cited non-viability of developing a small diesel engine complying with upcoming emission norms for exiting the space from next year. The company now feels it would miss out on a sizeable market share if it leaves the space but its rivals stay put, these people said.

The Suzuki Motor unit will stop selling diesel cars ahead of April 1deadline to meet new emission norms, but plans to re-enter the market in 2021, they said. It has begun work on a 1.5-litre diesel engine meeting BSVI standards, in line with rivals Hyundai Motor, M&M and Tata Motors that are upgrading their own diesel plants for mid-size vehicles.

NEW ENGINES TO TOYOTA
Maruti Suzuki is likely to strap the proposed diesel engine first in the Ciaz, Ertiga and S Cross, and subsequently in the Vitara Brezza and a seven-seater version of the SUV. In the hatchback and small sedan segments of Swift, Baleno and DZire, it would offer a CNG or hybrid engine as an additional option to buyers along with petrol, as there would be no diesel variants, the people said.

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A Maruti Suzuki spokesperson declined to comment.

A petrol specialist, Suzuki for decades had relied on a Fiat-supplied 1.3-litre multijet plant to power its mass-market diesel vehicles. The Italian company isn’t upgrading this to the new emission standards, so Maruti Suzuki is developing its own 1.5-litre plant, people said.

Barring the Volkswagen Group and the Renault-Nissan alliance, Maruti Suzuki’s rivals Hyundai, Mahindra, Tata Motors and Honda Cars are all upgrading their 1.5-litre diesel engines to meet BSVI standards. “It is a given that the 1.5-litre diesel has to come (for Maruti Suzuki), but everyone is keenly waiting for the final report on techno-commercial viability. Just Maruti Suzuki volumes alone may not make the business case, hence supplying for Toyota models in the future is an option being discussed to lower the cost,” said a parts supplier to the company.

Maruti Suzuki is estimated to have sold about 500,000 diesel vehicles in 2018-19, and this fiscal year, internal estimates suggest that number to fall to 250,000-300,000. Once the 1.5-litre diesel engine option is added to the portfolio, Maruti Suzuki expects this volume to return to 500,000-lakh level, including vehicles sold in partnership with Toyota Motor.

The New Delhi-based company has over the past months phased out its diesel models, except for the BS-IV versions of the Vitara Brezza and DZire Tour that have seen a surge in demand recently.

While it is set to soon stop production of these two diesel models as well, the sudden surge in demand for these may have also been a reason for it to reconsider the previous plan. It has now realised there will be a sizeable number of diesel buyers in the market even in the compact and midsize segments, the people said.

With the company that makes half the passenger vehicles in India exiting most of the diesel segments, the share of diesel cars, utility vehicles and vans in the local market slipped to 34% in the first half of fiscal 2020 from 40% a year earlier. About 22% of the vehicles sold by Maruti Suzuki in the first half were dieselpowered. Its share in the overall diesel market was less than 40%.

In India’s passenger car segment, the share of diesel was 14% in the fiscal first half, but in the utility vehicles space, it was high at 68%. Maruti Suzuki took an accelerated depreciation of Rs 160 crore to write off its diesel assets this financial year, but if there is an expected future demand then the company may have to re-value its diesel assets.

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