Sales of CNG-powered cars poised for major uptick post gas price revision

With the cost of running a car on compressed natural gas (CNG) getting a bit more affordable, vis-à-vis other fossil fuels, industry observers reckon that vehicles running on the green fuel will see increased adoption in the coming quarters.

After the Cabinet Committee on Economic Affairs (CCEA) approved a new domestic natural gas pricing plan on April 6, numerous gas distribution companies went for price revisions making the green fuel a bit more affordable. With the cost of running a car on compressed natural gas (CNG) getting a bit more affordable, vis-à-vis other fossil fuels, industry observers reckon that vehicles running on the green fuel will see increased adoption in the coming quarters.

Bestselling CNG models

While Indraprastha Gas Limited (IGL) had reduced its CNG price by Rs 6 per kg to Rs 73.59 per kg, Gail India subsidiary Mahanagar Gas Limited (MGL) slashed the retail price of CNG by Rs 8 per kg to Rs 79 per kg.

To boost sales further, there will be rollouts of CNG variants of the Maruti Suzuki Brezza (recently launched) and Grand Vitara, Hyundai i20 and Creta, Honda Amaze, Kia Sonet and Carens, Toyota Urban Cruiser Hyryder, Tata Punch, Nexon and Altroz, etc., as per JATO Dynamics (see table below).

ICRA Limited predicts that the recent price revision will result in CNG powertrain penetration in passenger vehicles (PVs) rising to 12.5-13 percent during this year and 18 percent by CY2027.

“The new gas pricing policy has led to CNG prices declining to levels seen nearly a year ago, thereby providing relief to consumers. Rising gas prices slowed down the adoption of CNG powertrains in H2 CY2022, led by a decline in the running cost differential between petrol and CNG powertrains and a consequent increase in the payback period for the latter,” said Shamsher Dewan, senior vice president and group head, corporate ratings, ICRA.

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Carmakers look for incremental volumes

Maruti Suzuki India Limited (MSIL), which has an almost 75 percent share of the domestic CNG vehicle market, believes that offering 14 options (with more arriving) out of its existing portfolio of 17 models will give it an edge over its competitors. The PV market leader is anticipating that its CNG vehicle sales will be between 450,000 and 475,000, taking the penetration to almost 25 percent of its entire line-up from the current 20 percent.

“In 2022-23, the CNG sales in PV grew about 53 percent to cross the 4-lakh mark. This happened despite the narrowing price gap between gasoline and CNG prices. With the lower CNG prices this running cost advantage will increasingly favour a jump in CNG cars demand, “said Shashank Srivastava, senior executive officer of sales and marketing, MSIL.

Hyundai Motor India, which sells two CNG options for the Grand i10 NIOS and Aura, is also looking to improve its monthly numbers for these products from 5,000-5,200 units last year to 6,000 units gradually during CY 2023.

“Very clearly the numbers are going up because dispensing stations and CNG give a lot of value to customers, especially entry-level ones because fuel efficiency is 30 percent more. So demand is robust,” Tarun Garg, director of sales, marketing and services at Hyundai Motor India told Moneycontrol earlier.  He recently stated, “The price cut on CNG is expected to give a fillip to our CNG model sales by an average 10-15 percent.”

Tata Motors, which currently sells CNG versions of the Tiago and Tigor, is also looking to expand its offerings in the CNG space in the next few quarters. The company revealed that nearly 33 percent of sales of both models come from their CNG variants.

“CNG will continue witnessing good demand as customers are increasingly wanting to choose alternate fuel options with the intent of being economical as well as eco-friendly. This will further get a boost with the recent reduction in prices as per the new pricing mechanism set forth by the Centre. Furthermore, Tata Motors has a robust CNG strategy in place and will surely excite its customers with an action-packed year,” a Tata Motors spokesperson said in response to queries sent by Moneycontrol.