Customer demand will decide future of diesel cars, says RC Bhargava

Chennai: India’s top automaker Maruti Suzuki India (MSI) has announced that it will phase out diesel cars from its portfolio from April next year. The carmaker’s light commercial vehicle is also set to come with alternative fuel options.

The firm which has a market share of over 50 per cent in the domestic passenger vehicle segment, reported a 4.6 per cent decline in net profit to Rs 1,795.6 crore for the last quarter of 2018-19, hit by adverse foreign exchange rates, high commodity prices and rise in sales promotion expenses.

The announcement to phase out diesel engines was made on Thursday by chairman of Maruti Suzuki, RC Bhargava. He said, ‘From 1 April, 2020, we will not be selling diesel cars.’

However, according to sources, the carmaker has decided to drop the 1.3 litre diesel engines, which it buys from Fiat, completely. Bhargava has hinted that diesel cars will make a comeback if there is a demand for them. The automajor might update its in-house developed 1.5 litre diesel to meet emission and customer demands. The company, however, ruled out bringing in models with strong hybrid technology this year.

Currently, 23 per cent of the company’s total sales in the domestic market come form diesel models. In 2018-19, the company had sold 4.63 lakh diesel cars in the country. Some of the company’s models like Vitara Brezza and S-Cross currently come with a diesel engine option only. Maruti Suzuki will also produce the Super Carry LCV with a petrol or CNG powered engine.

On electric cars and hydrogen powered vehicles, Bhargava said there is need to do a study whether they are suited for the country.

The company had posted a net profit of Rs 1,882.1 crore in the January-March period of 2017-18. Net sales during the fourth quarter rose to Rs 20,737.5 crore, up marginally over the year-ago period. Total car sales, however, declined marginally to 4,58,479 units during the quarter under review.

For the entire 2018-19 fiscal, MSI posted a net profit of Rs 7,500.6 crore, down 2.9 per cent from the previous fiscal. Net sales rose by 6.3 per cent to Rs 83,026.5 crore in 2018-19. Total car sales during 2018-19 were up 4.7 per cent to 18,62,449 units.

Besides, the company said it has earmarked a capex of Rs 4,500 crore this fiscal for new product development, R&D and land acquisition for sales network.

Bhargava said the company expected rural markets to perform batter in terms of sales growth for the company as compared with the urban centres. The auto major expected production and sales to grow between 4 to 8 per cent for the current fiscal, Bhargava said. In 2018-19, the company had targeted a sales growth of 10 per cent but could manage only 6.1 per cent.