Rising CNG prices may disrupt vehicles market

In March 2022, CNG was priced at Rs 66 per kg while diesel was at Rs 100.94 — a differential of 35%.

Rising CNG prices may disrupt vehicles market
The passenger vehicle segment grew 156% while the goods carrier segment grew 212% in FY22.  (Photo PTI)

Rising prices of compressed natural gas (CNG) are likely to dent the sales of CNG-powered vehicles. Moreover, these vehicles could face competition from their electric counterparts. According to a Motilal Oswal report, the Indraprastha Gas management has admitted that the introduction of electric vehicles can slash the demand for CNG vehicles long-term.

They are making plans to set up 50 EV battery swapping stations, stated the report. The last two years, however, had witnessed a rise in sales of factory-fitted CNG vehicles mainly because of an increase in the number of CNG stations and a significant difference in price between CNG and petrol or diesel.In FY22, CNG vehicle sales grew 55% year on year to 265,383 units and the growth momentum is continuing so far in FY23. But, with CNG prices inching closer to that of petrol and diesel, and even  overtaking petrol in some markets, the growth in vehicle sales could soon hit a brake.

Particularly affected could be the small and light commercial vehicle segment with the price hikes steadily eroding the advantages that CNG vehicles claimed. Lower operating costs and a spurt in the number of CNG stations across the country have shifted the consumer preference in the CV segment toward CNG-powered vehicles. The fuel efficiency of CNG vehicles along with a higher mileage of 4-5 km per kg has been attracting buyers. Besides, easier gas availability has also fuelled the demand. CNG refuelling stations in the country increased from 800 eight years ago to 4,500 now and the number is expected to touch 10,000 by 2030.The highest growth in the segment has been registered in three-wheelers. The passenger vehicle segment grew 156% while the goods carrier segment grew 212% in FY22. 

Also read CNG prices almost double in a year, petrol, diesel hover around Rs 100

Mahindra & Mahindra, Tata Motors, Bajaj Auto and Piaggio have been witnessing growth in their CNG portfolio.Bajaj Auto is witnessing success with the launch of a range of CNG models. Piaggio Vehicles is betting on CNG-powered rickshaws to grow at a faster pace in three years in the country’s last-mile mobility space. CNG vehicles would account for around 50-55% of Piaggio’s sales. M&M was among the earliest to introduce CNG models. It has innovated to expand CNG applications and launched a commercial vehicle fitted with two CNG tanks that travel longer distances without needing to refuel.

The companies attribute the growth in demand to the expansion of the gas grid and a network of 4,500 CNG pumps, which cover 87% of the country’s districts. Harish Lalchandani, marketing head, automotive division, M&M, said they had been seen pockets of growth in the CNG pick-up segment but the differences between CNG and other fuel prices was reducing, which could impact the growing popularity of CNG vehicles.

According to a Motilal Oswal report on Indraprastha Gas, the company had hiked CNG prices in quick successions so far in FY23 and more such increases are in the offing in the second half of this fiscal year. “CNG prices may rise above petrol and diesel prices,” the report said.

In March 2022, CNG was priced at Rs 66 per kg while diesel was at Rs 100.94 — a differential of 35%. Petrol was at Rs 116.72 per litre with a differential of 61%. Mahanagar Gas, which has 292 CNG stations, increased prices on August 3, taking CNG to Rs 86 per kg (Mumbai). 

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