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Last Updated : Dec 28, 2015 10:13 PM IST | Source: CNBC-TV18

Auto industry review: Was 2015 start of the end of diesel?

2015 is a year the Indian auto industry will not forget in a hurry.

2015 is a year the Indian auto industry will not forget in a hurry. In a landmark verdict, India's apex court ordered a temporary ban on diesel vehicles above 2000cc in Delhi NCR till March 31 in a bid to clean up the capital's toxic air.

Adding fuel to the anti-diesel fire is the Volkswagen debacle, which has put diesel technology under the scanner globally. Is this the end of the road for diesel technology? CNBC-TV18's Ronojoy Banerjee and Shweta Kothari find out.

In India the diesel uproar is hurting auto makers in general and SUV maker M&M in particular. The Supreme Court's partial ban on diesel cars over 2000cc in the NCR has abruptly altered the company's future expansion plans.

Currently, Delhi NCR adds around 1400 vehicles every day accounting for over 7 percent of total auto sales in the country. M&M, relies on this region for only 2 percent of its total volumes.

However, fearing a diesel backlash in other cities, M&M has now decided to speed up its petrol engine development plans with its South Korean partner Ssangyong, starting with the first ever petrol powered compact SUV: the KUV100.

Says Pawan Goenka, Executive Director, M&M: "It is true that diesel emits higher particulate matter (PM) compared to petrol but it is not true that diesel is primary culprit of pollution. Once BS4 is adopted, PM levels will reduce and one has to take a balanced view on this. I firmly believe diesel is unfairly blamed but we have to prepare for this. So we are preparing our petrol vehicles."

Car makers claim that In the last 15 years since the time Bharat Stage 1 norms were adopted by diesel manufacturers, total emissions of particulate matter 2.5 has come down by over 80 percent vehicles while NoX has been reduced by 50 percent.

Experts say that going from the existing BS 4 norms to BS 5 would make diesel cars even more expensive than their petrol counterparts, adding further to the diesel uncertainty.

Says RC Bhargava, Chairman, Maruti Suzuki: "Once diesel vehicles comply with BS 4 it would increase the cost and that could have an impact on the sale of small diesel cars."

Even the traditional price gap between petrol and diesel has been shrinking down from as high as Rs 20 to a litre 2 years back, to around Rs 14 rupees now. This has made the case for a diesel car less compelling.

In FY13, diesel sales accounted for nearly half of total passenger vehicles, that fell to 37 percent last fiscal and is less than 1/3rd so far this financial year.

But any talk on diesel will be incomplete without adequately mentioning the Volkswagen scandal. The German auto giant's blatant cheating of emission norms through a cheat software confirmed to many that diesel simply cannot be clean. The episode prompted strong reactions from across the world.

While the auto industry maybe vehemently opposing the ban there is little choice but to comply and de-risk as M&M is doing with the introduction of its first petrol engine. This also serves as a lesson for manufacturers and the government to be proactive and not be forced to clean up.

First Published on Dec 28, 2015 10:11 pm
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