New Delhi: Diesel manufacturers are feeling the first aftermath of Covid-19 pretty fast. The demand has just vanished on the spiralling fuel prices that has taken off the sheen from these diesel vehicles amidst a tough sales rally in an totally uncertain market.
For the first time ever diesel is costlier than petrol. The recent upwards price trends has made the future of diesel vehicles uncertain as it Rs 79.88/litre price and petrol at 79.76/litre in Delhi on Wednesday, have for the first time made it higher and shocked the automobile industry after state-run oil companies raised prices for the 18th day in a row.
The shift from diesel is much more pronounced and is also taking a toll on the demands for all vehicles, especially SUV’s that have gained traction in recent years. Most SUV models like Toyota Fortuner, Mahindra Scorpio or Vitara Brezza (BS-IV) are primarily diesel, but off late the share is dwindling drastically as customers prefer petrol vehicles which are also much lighter on the wallet.
Diesel has been the major source of sales for several automakers including Fiat Chrysler Automobile, Tata Motor, Mahindra & Mahindra, Isuzu, Volkswagen and Volvo amongst others~
Rakesh Srivastava the man who saw it coming and the Managing Director of Nissan Motor India told ETAuto, “This is quite unimaginable and difficult to believe. Diesel has always trudged petrol in India and the new change brings in a big question mark on diesel-vehicles that just a decade back dominated the Indian market. It also raises concerns on the customers sustained interest in diesel powertrain technologies as well as whether now these (Diesel) will become niche vehicles.”
Diesel has been the major source of sales for several automakers including Fiat Chrysler Automobile, Tata Motor, Mahindra & Mahindra, Isuzu, Volkswagen and Volvo amongst others. Most of these are primarily SUV makers or have diesel dominating their customer lines sales and have extremely light percentages of petrol in their portfolio..
The shift would be more striking as the BS-VI emission has further increased the price gap between diesel and petrol vehicles and customers are skeptical to shell out a higher price under the new norms. The cost of acquisition of diesel vehicles has shot up to 15 percent from the earlier 7-10 percent of the BS-IV era.
“It’s an affordability challenge in the Covid-times. People are trying to save money and spiralling diesel prices is making them change their decision to petrol. Most argue why to spend more money on vehicles, which are more expensive and now even the fuel is turning costly,” says Amit Kaushik, the Managing Director of Urban Science, a US-based consultancy firm.
Fuel wise sales Percentage in Domestic Sales:
|% of Diesel Cars in Total Cars||47||42||37||34||27||23||19||11|
|% of Gasoline Cars in Total Cars||53||58||63||66||73||77||81||89|
|% of Diesel UVs in Total UVs||97||94||90||87||85||84||83||65|
|% of Gasoline UVs in Total UVs||3||6||10||13||15||16||17||35|
|% of Diesel Vans in Total Vans||53||46||25||19||16||19||18||10|
|% of Gasoline Vans in Total Vans||47||54||75||81||84||81||82||90|
|% of Diesel PVs in Total PVs||58||53||48||44||40||40||36||29|
|% of Gasoline PVs in Total PVs||42||47||52||56||60||60||64||71|
Diesel losing sheen
Diesel is not a preferred fuel in the urban areas as driving distances are relatively short. Most commuters travel just 40-65 kilometres a day and it’s prudent to invest in petrol and CNG vehicles that are lighter on running costs.
The Covid-era has not just brought work from home (WFH) concept live but has also made the distance shorter for most of the daily commuters. While owning cars is gaining preference as a preferred mode of transport for safer and infection-free travel as people are expected to buy new cars more for necessity than comfort. So the customers in the current times are going for petrol to save on the initial investment as well as lower their future cost of running these vehicles.
Diesel vehicles are a more complex set of technology than petrol with a higher number of moving parts that makes them difficult and expensive to maintain in the long run. The cost of maintaining a diesel vehicle is almost double compared to petrol over a lifetime of a vehicle.
Auto fuel consumption March-May, 2020
|Fuel Type||March MT||April MT||May MT|
|Diesel||5,651||3,250 ↓57.51%||5,495 ↑97.24%|
|Petrol||2,156||973 ↓45.13%||1769 ↑82.05%|
(% Comparison from March’2020)
Diminishing Resale Value
The usage of diesel vehicles in many big markets are restricted. In Delhi and the satellite towns of Noida, Gurugram, Faridabad and adjoining NCR regions, diesel vehicles can run only for a max of 10-years. So, their life cycle is shortened by 50 percent compared to similar petrol vehicles that are allowed to run for at least 15-years from their time of registration.
The lower usage of diesel diminishes their residual price for the customers who prefer to buy petrol for higher gains after usage. The National Green Tribunal has mandated the restrictive usage of diesel vehicles across Delhi-NCR, and few more states like Kerala etc now contemplating to follow suit to curtail environmental pollution.
“Customers are not able to utilise the full value of the diesel vehicles. Despite better pick-up and higher mileage investments in diesel are not justified on diminishing returns and now the rising price would be killing the demand perpetually,” adds Kaushik.
In the Covid-era the customers are also downgrading purchases of cars and opting for micro, hatchbacks, compact sedans that are extremely price competitive compared to traditionally strong segments like SUV or MPV’s. Most of the automakers say that the sales trends have reversed in recent time and more customers are going entry level variants and basic cars.
“It’s the time for conscious prices. Covid has made people price savvy who are saving every single penny to invest wisely,” says a senior executive of an automobile company.
Besides the impact on the passenger the rising diesel prices would lead to massive inflationary impact on the market and would also damper the critical commercial vehicle and tractor segments that are completely dependent on this fuel.
Also Read: For the first time, diesel costlier than petrol in Delhi