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Maruti says loss due to discontinuation of diesel cars will be neglected

Ciaz is Maruti's only car to receive the new 1.5-liter diesel mill.

Maruti Suzuki India Ltd., the country's leading manufacturer of passenger cars by a huge margin, recently announced that it will remove all diesel variants from its product portfolio as of April 1, 2020 (deadline for emission standards BS-VI). The implication of this announcement seems to be quite significant considering that the automaker invested heavily in diesel power plants and introduced a new 1.5 liter diesel engine very recently. In addition, 23% of Maruti's sales in 2018 came from diesel models.

However, speaking to PTI, Ajay Seth, Chief Financial Officer, Maruti Suzuki India Ltd., stated that 99% of the diesel engine production capacity is being converted (in gasoline, NGV, etc.) and therefore the total loss due to diesel engine excavation is insignificant.

Maruti invested heavily in the new 1.5-liter diesel engine (Rs 1,000 crore), which was supposed to replace the previous 1.3-liter Fiat Multijet unit. However, when the Indian government decided to jump directly from BS4 emission standards to BS6, things have become very challenging.

The new 1.5-liter diesel engine was launched last month, is developed at a cost of Rs 1,000 crore.

Making the new compact diesel engine meet stringent BS-VI standards would mean a number of additional components, such as diesel particulate filters, more sophisticated catalytic converters, and significant redesign of various components and subsystems such as Exhaust Gas Recirculation (EGR). system.

The net result will be an increase in the prices of diesel models at such a substantial level that it will no longer be feasible, especially in the small car segments Maruti has specialized in. Maruti would be better off focusing its resources on the introduction of CNG, hybrid and electric variants of its popular models as alternatives to diesel variants.

A gasoline hybrid powertrain not only offers fuel efficiency comparable to that of a diesel engine that is in the same performance standard, but also enjoys subsidy in the government's FAME-II scheme (adoption and faster manufacturing of hybrid and electric vehicles) to the commercial segment (which are the majority of buyers of entry-level diesel cars). In addition, the government's effort to increase the CNG distribution infrastructure (a promise made to set up 10k CNG stations by 2028), would popularize the CNG variants, which again offer similar mileage, such as the diesel engine. So avoiding diesel engines would not cripple Maruti.

With the industry leader denouncing diesel engines, we believe it is only a matter of time before other OEMs follow suit. This move by Maruti could be the turning point in the country's nascent electric vehicle market.

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