To be first offered with the new SX4 Crossover (CUV) when it is launched in early-2015, the new diesel engine will help the car market leader be more competitive especially in the entry utility vehicle (UV) segment where diesel engines account for over 80% of sales and rivals like Ford and Honda already have larger and more powerful engines available.
“The upcoming SX4 crossover, which has already been launched in Europe, will be available with both a 1.3-litre and 1.6-litre diesel engines in India. The first is already made here, so the plan is to initially import the 1.6-litre diesel engine from Fiat and if the volumes are significantly high, then locally manufacture it afterwards depending on the licence agreement with Fiat. This engine will later be introduced in other sedans and UVs as well,” a source close to the development said. Incidentally, parent Suzuki already sources the same 1.6-litre diesel engine for the SX4 S-Cross model made its European plant in Hungary.
When asked about plans to import engines, a Maruti spokesperson said over email. “We will not comment on product plans”. However, expanding diesel engine options for new models is critical for Maruti since it expects the share of diesel cars to settle at 50% of new car sales. “Our share of diesel cars is low – for the industry it is 53%, while for us it is 30%. So we are still reacting to increased demand for diesel cars,” Mayank Pareek Maruti's COO for sales and marketing said recently after announcing the July-September quarter results.
Currently Maruti only has just one diesel engine in its menu, another Fiat-sourced 1.3-litre unit available in two states of tune, a 90-PS version used in the Ertiga and SX4, and a 75-PS version for the Swift and Ritz. Maruti's own diesel engines are also under development both at its technical center and at parent Suzuki Motor's Japan R&D. Its first self-developed diesel engine, a small 800cc unit for the YL7 small car (A-Star replacement, new 'Alto' for global markets) and the Y9T light commercial vehicle, will be launched next year. However, the larger engines of 1.2-litre, 1.4-litre and 1.6-litre capacity – that can be used on entry SUVs, are still under development.
Abdul Majeed, automotive practice leader at Pricewaterhouse Coopers said, “For any company having its own diesel engine capacity is important in order to not depend on a third party, so for Maruti importing engine will likely be a short-term measure”.
Maruti, which has a 40% share of India's 27 lakh passenger vehicle market, however will be a bit late into the compact SUV party since its plans are delayed by about a year due to issues in development and parts sourcing, sources said. By then, analysts add that competitors will be well-established - the Ford EcoSport, Renault Duster and Nissan Terrano have already been launched in the past year, while Hyundai, Honda and Mahindra are also expected to launch their own compact UVs by 2015. In this light, Maruti's compact SUV in the Rs 7-8 lakh range, codenamed 'YBA' and based on the 'XA Alpha' concept shown in Delhi Auto Expo 2012, will only be launched closer to 2016. But before that in 2015, Maruti will launch the SX4 crossover (Code: YAD) in the Rs 9-10 lakh range. Later in the pipeline is larger SUV based on the 'iV4 concept' that is expected for launch by 2017.
Kenichi Ayukawa, Maruti's MD & CEO also confirmed this earlier this week. “It will be quite difficult to launch the compact SUV in 2014, I don't think that will be possible,” he said when asked if the company plans to launch any SUVs next year. However, he confirmed that Suzuki is developing its own diesel engines.
Recently, Pareek had underlined the urgency to add SUVs to Maruti's portfolio. “I am always asking the engineering guys to quicken their work on SUVs, it is the need of the hour. I expect to see a 3-4% jump in our market share once we roll out our SUVs. Its among the fastest growing sectors today and accounts for about 21% of car sales and we are not present there, so we are losing out,” he had said.
Interestingly, Maruti has also delayed its diesel engine capacity expansion plans as demand for petrol cars bounce back on rising diesel fuel prices. Instead of the earlier plan to set up a 3 lakh unit annual capacity plant in two phases, it is now commissioning only half that capacity by end of this month while keeping the rest on hold. This is additional to Maruti's current annual diesel engine capacity of 3 lakh units (plus one lakh sourced from Fiat), and around 13 lakh unit petrol engine capacity.