Maruti scraps plans to increase diesel engine production

India's largest selling car manufacturer - Maruti Suzuki, has scrapped its plans of increasing its diesel engine production capacity at its Gurgaon plant due to the diminishing demand for their diesel cars.

The company currently produces 1.5 lakh diesel engines at the Gurgaon plant and had earlier planned to double the production. However, now the company does not see investing additional Rs.1,000 crores as a financially viable option.

In July 2014, Maruti extended its engine sourcing agreement with Fiat SpA for 3 years, to procure 1 lakh units from the Italian car maker. In addition, Maruti produces 3 lakh units (under the licensing agreement with Fiat) at its Manesar plant.

Maruti sold nearly 3.40 lakh diesel cars in the last financial year ending March 31, 2014, amounting to 33% of the total diesel cars sold. In the April-July 2014 quarter, the company sold 85,543 cars amounting to 28.5% of total diesel cars being sold. The share of diesel vehicles in India has fallen from 53% in the last fiscal year to only 48% in the current fiscal year.

An automobile giant such as Maruti shying away from investing to manufacture diesel motors is an indication at the changing attitude of car manufacturers towards diesel vehicles in India. The monthly price hike of diesel is reducing the price gap between the cost of petrol and diesel, and diesel prices are expected to be completely de-regulated by December, 2014. The Indian car market is likely to change from being diesel centric to being more balanced after a long time.

Source: ETAuto.com