Petrol gains traction among SUV buyers, Auto News, ET Auto

The share of petrol in the country’s fast-growing utility vehicle segment has nearly doubled in the past one year, thanks to a rise in the cost of diesel vehicles after the transition to BS-VI emission standards and the narrowing price difference between the two fuels.

Three out of every five utility vehicles sold in the Indian market last fiscal year ran on petrol, up from about one in three the previous year. The shift is particularly pronounced in the entry-level SUV segment where the share of diesel crashed to 25% from 60% in FY20.

The preference for diesel variants has reduced in hatchbacks (to 1% from 5%), sedans (6% from 33%) and vans (3% from 10%) as well last year.

Higher acquisition costs of diesel vehicles, improved fuel efficiency of petrol vehicles and the lower price differential between the two fuels have wiped off the gains of the lower running costs from diesel, industry insiders said.

“If the running costs of petrol and diesel vehicles are now similar, why should a consumer pay more to own a diesel vehicle,” asked Shashank Srivastava, senior executive director (marketing and sales) at Maruti Suzuki.

In May 2012, when the price gap between petrol and diesel was at its peak, diesel was 40% cheaper than petrol. After the diesel fuel was deregulated, its price has increased steadily and the gap with petrol now stands at less than Rs 5 a litre nationally.

In Delhi, where petrol cost Rs 98.46 and diesel Rs 88.90 a litre at pumps on Monday, with a price gap of nearly Rs 10, the running cost of a compact petrol-powered car was Rs 4.10 a km against Rs 4 for a diesel variant. While the savings on the running cost have thus become minimal, the premium for a diesel vehicle has increased to Rs 1.4-2 lakh from Rs 1-1.1 lakh after the transition to BS-VI standards on April 1, 2020.

Veejay Nakra, Mahindra & Mahindra’s chief executive for the automotive division, said the sub-4-metre, or compact, segment had seen an increasing preference for petrol vehicles with the phasing out of BS-IV.

The demand for the petrol variant of Mahindra’s XUV300 compact SUV had increased to 45% in FY21 from 33% the year before, he said. “Even in a true-blue SUV like the Thar, which is sub-4m, the gasoline (petrol) demand is a significant 25% of the bookings.”

Mahindra had added the mStallion range of petrol engines in 1.2, 1.5, and 2 litres in the recent past.

DIESEL FOR PREMIUM
Diesel, however, is expected to remain relevant at the premium end of the market as it delivers higher power and torque. Diesel variants contributed 64% to the volume in the mid-SUV segment and as much as 94% in high-end SUVs in fiscal 2021.

At Hyundai Motor India, 55% of the bookings for the recently launched SUV Alcazar came from diesel, while in the mid-size Creta, this was higher at 60%, said Tarun Garg, its director for sales and marketing.

“…there are certain markets like Telangana, Andhra Pradesh, Uttar Pradesh, Madhya Pradesh and Punjab, where demand for diesel is particularly strong,” said Garg.

Kia — which registers nearly 45% of its volumes from diesel variants — too expects the fuel to continue to be popular in the SUV segment. “While there are buyers for both petrol as well as diesel vehicles, there is particularly strong demand for diesel vehicles in the above-4-meter category, especially in the SUV and MPV segments,” said executive director-India Tae-Jin Park.

If the running costs of petrol and diesel vehicles are now similar, why should a consumer pay more to own a diesel vehicle.Shashank Srivastava, senior executive director (marketing and sales), Maruti Suzuki

According to Mahindra’s Nakra, the midsized crossover utility segment commanded a fair mix between diesel and petrol, while upcountry and certain pockets had shown a higher preference for diesel.

Mahindra has seen strong demand for diesel variants in products like Bolero, Scorpio and XUV500, he said.

Nakra expects the fuel preference of SUV buyers to be driven by usage, distance travelled, price and economies of scale.

But for those seeking the SUV driving experience, diesel is expected to remain the primacy choice.

“It delivers optimum power, torque and fuel efficiency,” said Vivek Srivatsa, head of marketing, passenger vehicles, at Tata Motors. “We continue to see very strong traction for our diesel portfolio. Harrier and Safari are 100% diesel, and the diesel penetration in compact SUVs is over 25%.”

Diesel penetration in passenger vehicles (in %)
Source : Industry