Phasing out diesel engines: How Mahindra, Tata, Hyundai and Mercedes reacted

Indian carmakers see Union Minister Nitin Gadkari's remark on additional tax for diesel engines as the wake-up call for them to make the shift to alternative fuel and electric vehicle sooner. On Tuesday, Gadkari hinted that diesel engines may soon attract 10% pollution tax, which led many to believe that the road for diesel cars in India could end soon. Carmakers reacted to the remark saying that share of diesel vehicle production will come down in near future due to stricter emission norms.

Carmakers like Mahindra and Mahindra, Tata Motors, Hyundai, Kia and Honda are a few who produce highest number of diesel vehicles in India. Mercedes Benz and BMW are also the largest manufacturer of diesel vehicles in the luxury segment. At the annual convention organised by Society of Indian Automobile Manufacturers (SIAM) on Tuesday, Gadkari had said the need to levy an additional 10 per cent tax on diesel engines to help cut emissions. However, he lated clarified that there is no official proposal regarding that.

Reacting to Gadkari's remarks, Tata Motors and Mahindra and Mahindra have been cautious. Veejay Ram Nakra, CEO of the automotive division at Mahindra and Mahindra, admitted such a move "will certainly have an impact on volume of sales." However, Tata Motors is unlikely to change its roadmap. Shailesh Chandra, Managing Director of Passenger Vehicles and Electric Vehicle Mobility at Tata Motors, said, "We will continue making diesel vehicles till there is demand." Both Mahindra and Tata have the largest share of diesel cars in the passenger vehicle segment.

Hyundai Motor too echoed Tata Motors, citing its strategy will depend on demand from customers. Hyundai's diesel car share in its portfolio came down to 18 per cent from 30 per cent between January and August this year. Tarun Garg, COO at Hyundai Motor India, said the transition to cleaner fuel has already started. However, it will take time to complete. As far as Gadkari's remarks are concerned, he said, “We have always believed that it is the government's job. We will do whatever the government want us to do, and we have always complied with all the laws of the land."

Irrespective of whether the Centre plans to phase out diesel engines with steep taxing, Maruti Suzuki India thinks number of diesel vehicles is expected to come down in India in near future. Shashank Srivastava, Senior Executive Officer (Marketing & Sales) at Maruti Suzuki India Limited said, “It is a natural phenomenon that as the emission regulations keep tightening, the cost of acquisition will keep increasing, and this process (decline in diesel vehicle percentage) will be much faster going forward."

Diesel cars in India was more than 53 per cent in 2013-14. It later came down to 18 per cent this year after stricter BS6 Phase 2 emission norms kicked in. Several diesel cars had to be phased out as they no longer had compatible engines. Maruti also thinks the ever closing gap of price between the two conventional fuel too leaves diesel with no advantage.

Mercedes Benz too has reacted to Gadkari's remarks. Santosh Iyer, Managing Director at Mercedes Benz India, said, “We will need six-odd months to change our production planning processes but we can always vary and shift based on the demand." Besides diesel and petrol cars, the German auto giant also leads the luxury segment with its electric vehicles in India.