Why Mahindra won't give up on its love for diesel despite BS-VI

Diesel has had a rough ride over the years, with an emissions scandal rocking a global automaker a few years ago even as closer home, carmakers fear that the upcoming BS-VI standard would make manufacturing diesel vehicles far too costly.

But Mahindra & Mahindra, whose forte is producing sturdy diesel SUVs, is not giving up on the fuel.

The company has pumped in more than Rs 1,000 crore into upgrading eight engines (including those used for powering commercial vehicles), 16 platforms and 35 variants to BS-VI standard.

M&M MD Pawan Goenka justified the investment, saying that concerns over the high cost of diesel vehicles under the new emission standard are overblown.

The statement comes after car market leader Maruti Suzuki said in April that it will phase out small-engine diesel models before April 2020 as the cost to upgrade them to Bharat Stage VI (BS-VI) standard is too high to be viable.

Maruti Suzuki had indicated that the price increase in diesel models will widen the gap between petrol and diesel to around Rs 2.5 lakh, much higher than the current gap of Rs 1 lakh.

Maruti is phasing out diesel variants of several models such as Brezza, Baleno, Swift, Dzire and Ignis.

But Goenka said that the impact will not be "as high as indicated by some companies."

“The only diesel passenger vehicle that we are not upgrading to BS-VI is the KUV100. That vehicle, which is powered by a 1.2-litre diesel engine, will be available in only petrol form,” said Goenka.

“We believe that in the passenger vehicle space, the 1.2-litre will be difficult to justify from the cost proposition. But for 1.5-litre engines, especially for SUVs, it will still be desirable. Most carmakers are phasing out the 1.2-litre diesels”, added Goenka.

Diesel forms a major portion of sales for M&M, unlike other companies where petrol model sales now are more than those of diesel models.

For instance, for the newly-launched XUV300, 75 percent of sales were from diesel variants.

But so far, Maruti is the only carmaker to have abandoned diesel models for the mass market segment the car.

That leaves plenty of room for players like Hyundai, Tata Motors and Mahindra to improve their market share. These three together control more than 30 percent of the market for diesel models in the diesel segment.

Tata Motors recently said that it will continue to provide diesels in its portfolio alongside petrol, electric and CNG.

While the country's second-largest carmaker Hyundai has declared that about 35 percent of 15,000 bookings received for the newly-launched Venue SUV are for the diesel variants.

More than 90 percent of M&M’s passenger vehicle portfolio is made up of utility vehicles.

Even as it remains positive on diesel, over the past years, the company has also added petrol engines as an option in almost each of its new launches.

Going forward, a petrol option will also be seen on the Scorpio and XUV 500 models as well, the popular SUVs that have been sold only in diesel thus far.