Diesel vehicle ban in NCR leads to losses for manufacturers

By: | Updated: May 21, 2016 7:10 AM

The ban on sale of diesel vehicles with an engine capacity of 2 litre and above in the national capital region of Delhi has resulted in a significant increase in inventory of diesel cars leading to losses for the manufacturers.

Diesel Ban India , Diesel Ban News, Diesel Ban DelhiIn order to compensate itself for the losses arising, Honda Cars India has started to export diesel engines and other components to its subsidiaries in Europe. (PTI)

The ban on sale of diesel vehicles with an engine capacity of 2 litre and above in the national capital region of Delhi has resulted in a significant increase in inventory of diesel cars leading to losses for the manufacturers.

Also, manufacuturing capacities are lying idle with some trying to utilise it for exports. Apart from this, the narrowing of the retail price between diesel and petrol has also made diesel cars less popular.

For instance, Honda City, which has been the highest selling midsize sedan in the country for the past few years and has a less than 2 litre diesel engine, average monthly volumes have decreased to 6,500 units from 9,500–10,000 units as the sales of the diesel variant of the vehicles have come down.

According to Jnaneswar Sen, senior vice president, marketing and sales, Honda Cars India, the sales of City has decreased by 12% in the January to March quarter compared the preceding October to December quarter.

“We are in a situation where customers are waiting for petrol cars and we have diesel cars lying with us. We have some diesel car inventory lying with us and we will look to distribute them in other parts of the county,” added Sen.

In order to compensate itself for the losses arising, Honda Cars India has started to export diesel engines and other components to its subsidiaries in Europe.

According to sources, the inventory of diesel vehicles lying at the manufacturing capacities is quite significant.

Another top executive of a vehicle manufacturing company said, “We have invested a lot of money on manufacturing diesel engines and have been introducing the diesel variants in a number of products and any extra cess on them will put extra pressure on us.”

Maruti Suzuki had increased its small diesel manufacturing capacity by 1.5 lakh units last year. According to dealers outside Delhi, the sales of the Celerio diesel have come down recently. Though the petrol one has been doing exceedingly well.

“OEMs these days try to maintain some kind of flexibility in the manufacturing lines. Life is becoming costlier and challenging for the small diesel engines. At BS 6 level diesel is costlier than other fuels and with the imposition of the taxes it is becoming unsustainable,” said Girish Wagh, senior vice-president, programme planning and project management, Tata Motors.

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