New Delhi, May 24: Share of diesel passenger vehicles (PVs) in the domestic market is expected to go below 25 per cent post implementation of BSVI emission norms from April 2020, according to rating agency ICRA.
The share of diesel vehicles which declined to 38 per cent in 2017-18 is expected to fall further to 35-36 per cent in 2018-19 and will eventually go below 25 per cent level post implementation of BSVI norms, the domestic rating agency said in a statement.
“Regular increase in the retail price of diesel in small doses every month since January 2013 has significantly narrowed down the retail price gap between petrol and diesel fuels, making cost economics of owning a diesel PV relatively less favourable now than in the past,” ICRA Senior Group Vice President Corporate Sector Ratings Subrata Ray said.
As there is a high correlation between petrol and diesel price gap, lower fuel price gap has resulted in customer preference shifting away from diesel vehicles, he added.
“Moreover, given superior fuel economy of hybrid cars, hybridisation has also reduced importance of diesel models. Lastly, the implementation of BSVI norms too will significantly widen the cost differential between petrol and diesel cars, leading to the eventual decline of share of diesel vehicles,” Ray said.
According to ICRA, once BSVI emission norms come into force from April 2020, prices of diesel cars are expected to go up by about Rs 75,000 as compared to relatively modest Rs 20,000 of petrol cars.
“Currently, a diesel PV is priced about Rs 90,000 – Rs 1 lakh higher as compared to its petrol counterpart but with advent of Euro VI norms, this gap will increase further to Rs 1.5 lakh to Rs 1.75 lakh, thereby further reducing advantage of higher fuel efficiency,” ICRA noted.
Small car buyers will therefore find diesel cars uneconomical due to higher break-even. However, SUVs will continue to be dominated by diesel, though their share too is expected to reduce to sub-60 per cent level over next 4 years from over 80 per cent level at present, it added.