Hyundai Motor bets on diesel-run vehicles to close in on Maruti

Hyundai Motor India Ltd, the country’s second-largest carmaker, is betting on diesel vehicles to narrow the sales gap with market leader Maruti Suzuki India Ltd, which will stop offering diesel vehicles from 1 April in line with the implementation of stringent Bharat Stage 6 (BS 6) emission norms.

Despite its more than two decade-long presence, Hyundai is yet to mount a serious challenge to the market dominance of the Suzuki Motor Corp. unit in India. Maruti has been able to control about half of the domestic market due to a slew of fuel-efficient and affordable compact cars.

This may change after the introduction of BS 6 norms as Suzuki has announced plans to cease production of diesel cars due to the high costs of developing them.

The Hamamatsu-based manufacturer is instead betting on compressed natural gas (CNG) vehicles.

Hyundai, on the other hand, has invested significantly in small diesel engines and is expected to price its offerings aggressively to hold on to customers inclined towards diesel vehicles.

S.S. Kim, managing director and chief executive of Hyundai Motor India, said that as long as prices of diesel vehicles remain affordable and acceptable for the customer, there will be significant demand. He said the company’s product offerings with diesel engines will be reasonably priced and that research and development as well as procurement teams are working towards reducing the cost.

“If diesel vehicles meet the BS 6 regulation, I strongly believe that it is a very good solution in terms of fuel efficiency. In this segment (sedan), Maruti used to get 30-40% of the total volumes from diesel. For (the) time being, Maruti does not have plans to continue in diesel vehicle (space)," Kim said.

Hyundai on Tuesday launched its new compact sedan Aura, with a 1.2 litre BS 6 compliant diesel as well as two petrol engines—1.0 litre and 1.2 litre—at the ex-showroom price range of ₹5.79-9.03 lakh.

The Aura is Hyundai’s second and most ambitious attempt to wrest control of the segment from Maruti’s Dzire model. Hyundai’s first model Xcent failed to make a major impact on the compact sedan segment.

The company will use the same 1.2-litre diesel engine in its compact sport-utility vehicle Venue and hatchback Grand i10 Nios.

Though Maruti dominates all the three segments with products like Brezza and Dzire and Celerio, opting out of diesel space may adversely impact Maruti as diesel vehicles account for 20-22% of the company’s annual sales volume of more than 1 million vehicles.

“We strongly believe that the market competition situation might be totally different from the past (in the sedan segment). Our overall market share last (calendar) year was 17.3% and I believe that we can better our market share by being in this segment. I expect market share to increase given that we have a very strong product pipeline for next (fiscal) year,"added Kim.

Also, it was widely expected that price between petrol and diesel vehicles would increase significantly after the introduction of BS 6 emission norms, but Hyundai and Kia Motors have decided to keep the price differential small by absorbing some of the costs.

A senior executive at one of the rival vehicle manufacturers said Hyundai has spent heavily on producing BS 6 diesel vehicles and now the company has to make them affordable irrespective of the cost of development.