When Maruti Suzuki made the surprise announcement of its decision to desist from diesel vehicles in the domestic market on April 25, 2019, their sales share to the OEM’s overall portfolio was close to 22%. Diesel vehicles were stopped on March 31, 2020, the day before the beginning of the BS-VI era.
However, the OEM switched over to CNG to plug that gap. At the end of December 2021, CNG models contributed 15% of Maruti Suzuki’s overall sales.
If the current CNG demand trend continues, and Maruti Suzuki’s internal plans get executed, sales share of CNG vehicles could be similar to that of the diesel ones 3 years ago. The company has plans to offer CNG option to another 3 to 4 models in its portfolio in the next few months.
Maruti Suzuki has 14 passenger vehicle models and 2 cargo carriers in its portfolio now. With the planned additions, 10 -11 of its models will offer CNG options.
“The present CNG share in our sales is at 15%. It can actually go beyond our diesel percentage of 22%, just by the increase in portfolio. I’m not considering the market expansion which is also expected. So, both with the increase in portfolio and the market expansion, I would see that the share of CNG can exceed 22%, which we used to have in diesel,” Shashank Srivastava, Senior ED – marketing and sales, Maruti Suzuki, told ETAuto.
The OEM’s models with the highest percentage of CNG sales are Tour S (78%), a version of the Dzire sedan for fleets, and Ertiga (46.4%) in the personal vehicle segment.
In the domestic passenger vehicle market, Maruti Suzuki and Hyundai Motor India have been the only OEMs offering models with a factory-fitted CNG system. Tata Motors’ entry into this space with its Tiago and Tigor models on Wednesday completes the presence of the top 3 passenger vehicle OEMs in the growing CNG market. Tata Motors expects the CNG variants to contribute around 30% of each of these model’s sales.
CNG demand in the domestic passenger vehicle market stood at 172,000 units during 2020-21. It crossed 160,000 during the current financial year. With sales of 132,000 units during April – December ‘21, Maruti Suzuki had 82.5% market share in the CNG segment. There will be growing competition in this space with the entry of Tata Motors which is pursuing an aggressive growth strategy.
Growth drivers
The rise in fuel prices, and the significant gap between CNG and petrol/diesel prices are seen as the key drivers for the adoption of CNG vehicles even for personal use. The government’s plan to expand the CNG dispensing network to 10,000 stations is also fuelling the CNG growth trend.
However, the sustainability of the CNG adoption trend would hinge on a few factors like fuel price movement, and the continued ban on CNG kit retro fitment in BSVI vehicles. The latter is also one of the reasons for OEMs to expect good volume opportunities in the CNG space.
Maruti Suzuki expects the strong growth of the CNG vehicle market to continue in 2022. It is learnt that the company had a target of selling around 250,000 CNG vehicles during the current financial year. It’s unlikely that this target would be reached, as the pandemic also impacted production and sales. The target for FY23 could be to double the sales volume, according to a source.
“During the second COVID wave, for three months all the cylinders were diverted for oxygen supply and there was no CNG production. As a result, there has been a build-up of pending bookings, and the waiting periods are also higher for CNG models. There has also been a loss of volume because of this,” Srivastava said.
Despite the disruption, the growth rate of CNG vehicles has outpaced diesel/petrol vehicles during the current financial year. “The overall passenger vehicle volume in the financial year went up by about 5.2%. But for CNG the growth was by more than 50%,” he added.
Changing energy-mix
For Maruti Suzuki, the demand for CNG vehicles is helping it cover a good portion of the lost volume in the diesel passenger vehicle segment. Though the diesel demand in the overall market is on the decline, there are segments where Maruti Suzuki is losing volume opportunity due to the lack of a diesel offering.
The midsize SUV segment, with players like Hyundai Creta, Tata Harrier, and Kia Seltos, sees around 57% of the sales volumes from diesel. In contrast, in the hatchback segment, a stronghold of Maruti Suzuki, the share of diesel is estimated to be just around 1%. It could be that Maruti Suzuki would look at offering one or two petrol midsize SUV/SUVs to change the fuel-mix in the market. There may not be any market for a CNG SUV. But the rest of the passenger vehicle market is set to see higher proliferation of CNG passenger vehicles.
In the passenger car segment, CNG/Bio-CNG, and hybrids will form a good part of the future energy-mix. Maruti Suzuki, being the largest player, could play a key role in shaping the trend,” V G Ramakrishnan, Managing Partner, Avanteum Advisors, said.
Affordability being a key pitch for Maruti Suzuki, electric vehicles don’t seem to be a priority for it yet. Instead, along with petrol and CNG in the short-term, mild and strong hybrids could form the energy-mix for Maruti Suzuki’s product portfolio for some time to come.
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